Minister of Finance, Economic Planning and Development Goodall Gondwe has finally let the cat out of the bag in terms of how government plans to raise money and spend the same in the 2016/17 financial year set to start on July 1.
The minister unveiled a K1.1 trillion proposed budget in Parliament last Friday which demonstrated traits of political boldness by, among others, reducing the number of beneficiaries for Farm Input Subsidy Programme (Fisp) from 1.5 million to 900 000. Generally, Fisp has been seen as a politically popular programme that, over the years, made less economic sense.
The Fisp budget has been trimmed by almost half from K63.9 billion in the revised estimate for 2015/16 financial year to about K31.4 billion.
Conspicuously missing in the proposed budget is President Peter Mutharika’s pet project, the Decent and Affordable Housing Programme, popularly known as Cement and Malata Subsidy that had a K7 billion allocation in the current budget to provide cement and iron sheets to low income earners over a five-year period. This is one programme many commentators asked government to shelve in the prevailing economic circumstances as it did not make sense.
Briefly, the proposed 2016/17 National Budget is based on four priorities that seek to increase domestic resources mobilisation, purchasing food, maintaining the wage bill at below seven percent and committing to ensure predictability in key social sectors of health and education.
My main concern, however, is the practicality of the public tax collector, Malawi Revenue Authority (MRA) to raise the projected targets to finance the 2016/17 National Budget against the background of current under-collection by the agency.
Rightly so, Gondwe hinted that MRA had proposed a much lower target of K698 billion, but Treasury and the International Monetary Fund (IMF) raised it to K708.8 billion.
In making its projection, I feel MRA looked at the realities on the ground to collect revenue from a bleeding economy where industry is struggling to produce.
Much as MRA has its own internal inefficiencies, I give the public tax collector a thumbs up for giving a clearer picture.
My fear is that giving MRA an unrealistic target will only make the agency bully taxpayers in its quest to meet the set target. This will be counterproductive and may not help the cause to fund the budget.
I feel an ideal situation is one where MRA is challenged to collect the target it set. Mind you, this is the same economy with same taxpayers where MRA is presently struggling to collect. Giving MRA a higher target is like expecting to get more milk from an underfed thin cow. It just does not make sense.
For years, we have heard about “broadening the tax base” to make those not paying taxes pay the same. The nation needs to be updated on progress in this area as well.
Members of Parliament (MPs) are this week meeting in cluster groups where they are scrutinising the proposed budget. This is a good platform which offers them an opportunity to contribute to a realistic budget.