Malawi zero-aid budget avoid consumer taxes: Reduces corporate tax, duty on cigarettes
Malawi government has announced in the 2014/15 national budget that corporate tax has been reduced without increasing any consumer taxes amid the absence donor injections into the budget.
One of the key highlight in the budget, presented in Parliament by Minister of Finance, Economic Planning and Development Goodall Gondwe on Tuesday, is the reduction of corporate tax from 33 to 30 percent in the telecommunication sector for mobile phone operators.
Reduction of corporate tax, according to Gondwe, would promote growth of the industry that had complained of high tax, besides attracting foreign investors.
“We believe this is not a year for tax reviews but of studying tax reforms,” Gondwe said.
Gondwe also told the House that excise duty on cigarettes has been reduced with an introduction of single rate from $30/1000 sticks to $15/1000 sticks.
He also informed that the 3 percent withholding tax that is applicable to the smallholder farming community has been declined.
But the Finance Minister said government will now relieve VAT under the Third Schedule of the VAT Act on production of fertilizer and medicine.
Government has also removed the import duty, import excise and VAT on minibuses that are zero to five years.
Gondwe disclosed that government will allow duty free importation of goods by banks covering; ATM machines, point of sale devices, mobile banking vans.
However, the budget statement titled ‘Restoration of Fiscal Discipline as a Foundation for Poverty Reduction’ fell short of clearly stating where the Malawi Revenue Authority would get the $1.2 billion for recurrent expenditure, which includes a 24 per cent salary increase for civil servants.
The Finance Minister, who was hopeful that developing partners would resume their donor support to Malawi in the course of the year, said the 2014/15 resource envelope is severely constrained as a result of the $761 million cumulative domestic debt, withheld budgetary support and arrears of which only $119 million will be paid out.
Malawi’s Financial Year begins on July 1 but because of the May 20 elections and the subsequent change of government, the new Peter Mutharika administration asked Parliament for a three-month extension.
Donors cut aid in 2013 after revelations that top government officials had siphoned off millions of dollars of public funds.
The 193-member opposition-dominated Parliament will deliberate on the budget for five weeks before adopting or rejecting it.
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