Parliament increases National Budget by K5.5Bn: Passes 2021/2022 Budget in record time in history

For the first time in history, Malawi’s Members of Parliament (MPs) has voted for the Tonse Alliance administration’s 2021 / 2022 proposed national budget to the tune of K1.995 trillion with an upward adjustment by K5.5 billion in just under three-and-half hours.

However, economic analysts have described the passing of the 2021/ 2022 in a record short time in history as either a sign of excellency and efficiency from the legislators or just a pure case of just let it be done.

Minister of Finance Felix Mlusi in Parliament.-Photo by Govati Nyirenda, Mana

Said one top government economist: “The way the MPs have speedily passed the 2021/2022 national budget is either impressive or disappointing depending on the reason behind it.

“It could be that our MPs are very efficient and good at what they do and that is very impressive and yet again, it could be that they do not understand issues involving the budget and anything to do with figures, so they just let it pass just for the sake of not wanting to go through the trouble of analysing the figure and if that is the case, it really very disappointing.”

Nyasa Times understands that the Chakwera 2021/2022 proposed budget was initially pegged at about K1.9 trillion.

In his remarks Lilongwe, Finance Minister Felix Mlusu commended the legislators for their objective analysis of the financial plan and for supporting the government’s economic plan and recovery.

The Malawi public purse keeper, Mlusu further urged the lawmakers to consider providing proposals on where treasury should tap financial resources, when they lobby for increased financial resources to other budget lines.

Mlusu Among other things, he clarified current gaps in the provision of COVID 19 vaccine is a supply issue triggered by high demand on the global market.

According to Mlusu, following input from the MPs, treasury has made upward adjustments to budget lines for various establishments.

Such include Parliament, the Audit Office and MEC for the constituency re-demarcation exercise.

ADMARC will get K95 billion for purchasing farm produce including maize. Treasury has also provided funds for the delinking of public universities. The adjustments are estimated at K5.5 billion.

“It should however be noted that these adjustments have resulted into an increase in the deficit by about K5.5 billion since the increases have no corresponding increase in revenues,” said Mlusu.

The finance minister further said about K400 million has been cut from the Public Procurement and Disposal of Assets (PPDA) vote, saying the institution has the capacity to generate revenue.

From Wednesday June 22, the parliamentarians will get to the committee of supply stage. This is a time they scrutinise the budget vote by vote, before it is eventually passed.

The seven-week long budget meeting is currently in it’s sixth week.

The Budget at Glance

Malawi’s Ministry of Finance recently published the Budget Statement for 2021-22, which was delivered in parliament on 28 May 2021 and Nyasa Times hereby analyses the tax policy measures of the budget are summarised as follows:

Income Tax Measures

The introduction of two additional individual income tax (PAYE) brackets, resulting in the following brackets/rates for monthly income:

  • MWK 0 to 100,000 – 0%
  • MWK 100,000 to 1.0 million – 25%
  • MWK 1.0 million to 3.0 million – 30%
  • MWK 3.0 million to 6.0 million – 35%
  • MWK 6.0 million and above – 40%

Measures to incorporate the informal sector and widen the tax net, including:

  • the introduction of presumptive tax rates for small businesses whose turnover is less than MWK 12.5 million to encourage compliance:
  • tax clearance certificate requirements for certain services and transactions; and
    requirements for all citizens to have a taxpayer identification number (TPIN), with TPIN requirements when opening a bank account; and;
  • The reintroduction of withholding tax (advance income tax) on imports that will apply to all commercial importers without a valid tax clearance certificate, with certain exemptions including for international organizations that are exempt from income tax, government entities, and imports below USD 3,000.

VAT Measures

  • An increase in the VAT registration threshold from MWK 10 million to MWK 25 million;
  • VAT zero-rating for fuel ethanol, printed books, and textbooks as part of efforts to promote local productions;
  • VAT zero-rating for fish feed and VAT exemption for machinery specifically used for producing fish feed to support the development of aquaculture;
  • The extension of the VAT exemption for portable sprayers for agricultural or horticultural to all such sprayers, including mounted sprayers;

The removal of import VAT on:

  • Raw materials for use in the manufacturing of medicaments, pharmaceuticals, and medical apparatus; and
  • Raw materials for use in printing and publishing books;
  • Clarifications regarding which transactions are banking transactions exempt from VAT, so that VAT is properly charged on non-banking services;
  • The reduction in the validity of invoices for claiming input VAT by VAT registered taxpayers from 12 months to 6 months in order to address abuse.
  • In addition to the above, the Budget also includes several customs and excise tax measures.
  • The VAT and Income tax measures will become effective 1 July 2021 once the relevant Amendment Bills under the Taxation Act and VAT Act are deliberated and passed. The customs and excise tax measures, however, are generally effective from midnight on 28 May 2021.

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