Why Minister of Finance needs to explain low projected growth of tax revenue in 2015/2016
In my recent article published by Nyasa Times I pointed out that according to the Minister of Finance tax revenues will grow by mere 2% in 2015/2016 from K581billion in 2014/2015 to K592billion in 2015/2016. This is likely to be the lowest growth of tax revenue since 1964 when Malawi became an independent nation.
In view of the foregoing let me highlight some of the reasons why I feel that this sharp drop in tax revenue growth calls for a rational explanation by the Minister of Finance:
1. Even a conservative tax revenue growth of 10% based on the 2014/15 tax revenue figure of K581billion would bring in an additional revenue of K50billion. This would go a long way towards paying for essential services such as increasing the number of trainee health personnel such nurses, clinical officers etc. It may even make it possible for Government to start considering whether to reduce or eliminate fees for health personnel trainees in order to dramatically increase the supply of health personnel to ease the shortage of health personnel in the country.
2. A declining percentage of tax revenue growth automatically means that the cost of collecting each Kwacha of tax revenue in 2015/2016 fiscal year will increase. It is widely accepted that the rising cost of collecting each Kwacha of tax revenue has the effect of shrinking the tax base. Indeed one of the proposals I would like to put forward is that the Minister of Finance should be informing Parliament the cost of collecting each Kwacha of tax revenue.
3, At a time when it is becoming imperative for Malawi to finance its recurrent budget from domestic revenues it sends a bad signal for tax revenue growth to be declining as it will happen in 2015/2016 financial year unless there is a credible explanation for such a decline.
4,A declining tax revenue growth may also be indicative of the problem of revenue leakage. If that is the case then there is need for measures to be taken to tackle the problem.
As I stated in the previous article in the post MRA era the nation expects a better tax revenue performance than in the era before MRA and a reducing tax burden. Indeed these are some of the objectives that the formation of the Malawi Revenue Authority is intended to fulfill.
- Ernest Mtingwi is former director general of MRA