Hon Folks, the K1. 1 trillion fiscal blue-print as presented by Goodall Gondwe last Friday still begs one question: where will the money come from?
Last year, the Malawi Revenue Authority (MRA) did this and that, including enforcing the use of value added tax (VAT) data-generating machine, but failed to meet its tax-revenue targets. Government also tweaked the price-tag for services which generate non-tax revenue but the impact did not make much difference.
Eventually, government was forced to adjust the budget downwards in nominal terms when prices of imports were soaring as the kwacha somersaulted backwards amid floatation pressure.
Goodall admitted that MRA set its 2016/17 tax revenue target proposal lower than what government and IMF expect from the tax-collector. Not that government and its Washington DC-based budget mentor have identified any new wealth-generating activities to tax.
The most notable measure introduced is the creation of VAT with “finer mesh” to entrap most of the consumables hitherto exempted for the sake of the poor. Without prejudicing the merit of such an action, it goes without saying that the proposed VAT policy is essentially a tax on poverty.
Again, Goodall justified such a measure by observing that the rich too benefitted from the VAT-exempted consumables. If the intention was to truly make the rich pay through the nose without negatively affecting the majority poor then where in the budget are the so-called safety nets?
It has to be appreciated that the poor do not speak out when Goodall does his pre-budget consultations. They are not invited to the hotels where such meetings take place.
Could this explain why a country with the most skewed Gini coefficient (income distribution) in the world and the lowest gross domestic product (GDP) per capita in the world (save probably for war-torn Somalia) has no qualms imposing a 16.5 percent tax on the consumption of its citizens? Will it increase tax revenue or push more and more people out of the money economy?
The moral flip-side of this year’s budget is best appreciated by asking: how will the revenue obtained by making the poor poorer be utilised?
I don’t think we can fault much of what Goodall said in the august House on the expenditure side of the budget, suffice it to say that government is exacting a 16.5 percent tax on consumption of the poor, not for development but for its own consumption.
In the 2016/17 fiscal plan, donors shoulder over 80 percent of its developmental budget. All along government was responsible for at least 20 percent of it. Forget what APM and his cronies brag about in political rallies, the development government is pledging—if it happens at all—will virtually be wholly funded by the same donors we are told we should free ourselves from.
How, you may ask, will government then spend the money extracted from the poor, on the fertiliser subsidy programme? No. In fact, Fisp which is now reduced by almost half, will benefit slightly over 65 percent of the usual 1 500 000 and will cost the beneficiary whatever is the difference between the amount government will put on the coupon and its market price tag.
The disturbing fact is that the APM administration is taxing the poor so that ministers can drive expensive Prado TX cars, get 1000 litre fuel allocation a month for travelling between their Area 10 residences and Capital Hill—a distance of 5 to 10 minutes—and fly business class at almost twice the cost of flying economy class which is used not just by John Magufuli’s cabinet in Tanzania but even diplomats for the US, the biggest world economy.
The disturbing fact is that about 30 percent of revenue raised by taxing poverty will not be used for the intended purpose—drags for public hospitals, education materials for public schools, etc—but will continue being wasted to corruption, fraud and incompetence.
The disturbing thing is that while government is taxing poverty to raise domestic revenue, there isn’t a corresponding change in the life-style of the President, his ministers and senior government officials. They live as if Malawi is awash with the petro-dollar.