Kapito hails tax reforms, challenges  Malawi govt on budget implementation  

Consumer and human rights activist, John Kapito has hailed government for removing Value Added Tax (VAT) on milk and an upward adjustment of the minimum wage which are some of the changes made on tax regime under the 2017/18 national budget.

Kapito: Budget implementation is key

In this year’s budget currently being scrutinized by Parliamentarians through cluster system, government has removed 16.5% Import VAT on milk and increased the minimum wage from K19, 000 to K 25,000 apart from adjusting the tax bracket from K20,000 to K30,000.

Other changes include the reintroduction of 16.5% Import Duty, Import Excise and VAT on imported minibuses and big buses, re-introduction of single excise rate of US$ 15 per 1,000 cigarette sticks or its Malawi Kwacha equivalent for both imported and local manufactured cigarettes as well as 10% VAT on pay television.

In an interview with Nyasa Times, Kapito while describing the current budget as not different from previous ones commended government for the tax reforms but challenged the authorities to walk the talk on the ‘ambitious’ K1.3 trillion proposed national budget.

“As consumers we are happy with the removal of tax on milk and increase on minimum wage although not reasonable considering the economic problems ordinary Malawians are facing.  But we are happy with the changes,” said Kapito.

Kapito said government has a daunting task to raise funds to meet the proposed budget requirements, and decried rampant fraud and corruption amongst civil servants.

“The questions are on our failure to implement similar ambitious budgets in the past. We always find ourselves in pool of poverty despite approving such interesting budgets. There is should be value for money. The need for implementation and proper delivery for goods and services will be a test for this budget. It’s a quite huge task for all government agencies and department to manage and implement such budget,” added Kapito.

He is, however, optimistic the country will benefit more from this year’s budget if there is political will and if authorities are fiscal in its implementation.

“It is easy to do on paper but harder to implement. If we can learn to be disciplined in implementation, then we can do better even with little money. There is a need for political will to implement this budget. As consumers we are hoping to see a change and this budget should be seen as an improvement of people’s social welfare.”

Under the current tax regime changes employees receiving monthly pay from K3 million above will have to pay 35% of their salaries as Pay As You Earn (PAYE).

Finance, Economic Planning and Development Minister, Goodall Gondwe said the increase of the tax bracket from K20,000 to K30,000 is expected to cost government revenue in excess of K10 billion and said there was need to explore other means in recouping this loss and found an answer in the millionaire salaried employees.

“In order to improve the distribution of income from the rich to the poor and increase the progressivism of the tax system, government is introducing an additional bracket of 35% on those earning alarmed income above K3, 000,000 per month. I wish to highlight that this top rate of 35% will not affect individuals who earn their income from businesses,” Gondwe told Parliament on Friday last week.

Parliamentarians are currently going through the budget with the help of government officials before approving it.

Some experts and economic commentators have described the budget as a mixed bag.

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