Budget pyramids

Budget pyramids

It is 45 years since the death of American psychologist Abraham Maslow. Credited with his hierarchy of needs, readers of motivation theories revel in his prowess. Maslow would be surprised with how individuals have shaped his theory to suit their situations. What do you consider your basic need? It is a question that produces different responses.

Last week, all of us became experts on public finance, courtesy of free speech. It is not meant to demean anyone. I am simply enjoying the very rights to speak freely, like many others. I cannot preach any credentials in the field but I am 100 percent sure that I use the Internet, SMS and do not like this tax. I surely got so interested in this tax on Internet-related services.

In my life, Internet has become a basic need. I connect with my family, friends and business associates at lower cost. The Internet surely appears right at the base of Maslow’s pyramid for most 21st century human beings. I reckon the same works for campaign strategists. It should be cheap. Is this tax necessary?

As we try to explain why an Internet tax is not needed, I suggest that tax authorities and the Finance Minster pay close attention to landlords that don’t declare their rental income. A starting point would be the assets declaration office. Do we have property owners amongst them? Do they declare their rental income to Malawi Revenue Authority (MRA)? It would help to attain the basic need of the Finance Minister, balancing his budget. Maybe this is food for thought in the next budget?

The tax is presented as a tax on SMS, Internet and data related services. Any connection to the Internet involves data that one pays for. So basically, once you log into the Internet expect your normal bill to go higher by 10 percent. Internet service providers will surely raise their fees to pass on this cost to all of us. So what services should one expect to potentially go up?

Recently, Malawi for the first time saw a national switch for the banking system go live. It meant that you can use your automated teller machine (ATM) card on virtually any machine. One immediate consequence has been reduction in interbank charges on transferring money from one bank to another.  But what may happen? Banks are a major user of data services. Their real on time networks are live data services that the 10 percent tax may potentially target. Next time pay close attention when banks start adjusting their services up to cover such a cost notwithstanding the high borrowing costs.

Mobile phone use has gone up and the gadgets have been spared duty. Most rural areas are only connected via mobile phone networks. TNM and Airtel mobile money transfers have proved to be a very effective service to transfer money from urban areas to rural areas where the majority and the poorest of this country live. Rural areas do not have banking services and mobile money transfers will simply go up as well by the same amount I suppose. Is it a tax on poverty? Possibly, in the sense that it is the poor unbanked people that use such services.

You can think of many other services. From your airline ticket to hotel services. In essence, it is a cost to doing business at all services. It may not be the best tax considering that access to broadband Internet is a necessity. Fast Internet and less costly Internet allows our education system easily access resources online. It can also be viewed as a tax on education.

Even more interesting is how balancing the budget may be affected. Does the government use the Internet and any data services? Maybe it has been factored already but individual departments will now pay Internet service providers 10 percent more than before.

But I would not strongly blame Minister of Finance for this tax. He too, like me has his own hierarchy of needs that would fit very well in a reconstruct of Maslow. His basic need is to balance the budget period. It is one of the toughest jobs on the land at the moment amid frozen aid. It is not surprising that he goes around every year to seek views and opinions. I wouldn’t be too harsh on him.

I can imagine the kind of opinion he gets. Some of the people that come to his meetings suggest a lot of things, but do not want to pay tax. Some are actually landlords that have never paid a single penny on their rental income and are annoyed with a tax on the Internet. Who is milking who? Precisely who is the thin cow being milked?

Elements of tax evasion are increasing every day. While building a pyramid of needs may look simple, for the finance chief it involves deciding which concrete block or brick to use. I suppose his team put much effort into the Internet tax, but I think it is not the best brick. Why not try environmentally-friendly cement blocks?

While the two budgets presented, so far, have not had rapid tax measures, I think there is a starting point for the third one. One tip I would give MRA and the Minister of Finance is to befriend the office of assets declaration at Parliament. There are files there of people that have declared ownership of real estate or houses that are rented but do not declare any tax on their rental income.

Isn’t taxing landlords not better than taxing data services? This Internet tax is no different from the infamous tax on bank charges that was abolished not long.