The private sector has hailed the K406 billion (about $1.6 million) 2012/13 budget as pro-business, saying a lot of proposals they submitted to government have been taken on board.
Finance Minister Dr. Ken Lipenga tabled the financial plan in Parliament on Friday, the first for the Peopleâ€™s Party (PP) administration, amid high expectations from the public in view of recent economic developments such as the 49 percent devaluation of the kwacha, runaway inflation now at 12.4 percent and rising cost of living.
Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira has cited the removal of a number of â€˜punitiveâ€™ taxes in the previous zero-deficit budget (ZDB) as a move in the right direction.
Â He said the taxes made companies post losses and also downsize their operations.
â€œThe main thrust of this budget is that it forms a basis for production. It is the budget that, we think, if we have to move forward, we have to be a private sector-led economy. Basically, we are really not complaining. We believe this is the budget that will form the foundation for growth of this economy,â€ said Kaferapanjira, at a post-budget meeting convened by the Malawi Economic Justice Network (Mejn) in Lilongwe monitored on Zodiak Broadcasting Station.
Despite the budget not clearly articulating measures to cushion the poor from the effects of the devaluation, Kaferapanjira observed that the expansion of the Pay As You Earn (Paye) tax-free band to K15 000 from K12 000 will cushion those who earn less by increasing their income.
He also said the increase in the number of beneficiaries for the Farm Input Subsidy Programme (Fisp) to 1.5 million from 1.4 million, is another way of cushioning the poor.
â€œGovernment has tried to cushion the people who are behind the [agricultural] sector. It cannot be better than that,â€ he said.
Lipenga announced that government has worked with the World Bank to develop a Comprehensive Programme for Competitiveness, Growth and Poverty Reduction. Â
He said the proposal is for an additional $50 million (K12.5 billion) which will focus on regaining macro-balance and a market-based economy to help accelerate the normalisation of the economy and growth rebound and protect the poor and vulnerable in the short term while improving the transparency of economic management systems. Â
The programme, according to Lipenga, will be complemented by an extension of two existing grants: $50 million for Malawi Social Action Fund (Masaf) to improve the livelihoods of the poor and $50 million for the Irrigation, Rural Livelihoods and Agricultural Development (Irlad) programme to increase agricultural productivity of poor households.
Kaferapanjira said the move is also another way of cushioning the poor.
The taxes that have excited the private sector include the removal of one and two percent turnover taxes for turnover under K50 million and over introduced in the 2011/12 budget which was deemed anti-developmental.
Lipenga also announced the removal of Capital Gains from the sale of share on the Malawi Stock Exchange (MSE) that are held for more than one year to encourage long-term investment.
He said government remains committed to ensuring that there is a vibrant stock exchange market in Malawi which will be competitive in the region.
Others tax measures include the increase in initial investment allowance on new and unused industrial buildings and plants and machinery from 40 percent to 100 percent and international transport allowance to 25 percent from 15 percent, the increase in export allowances from 15 percent to 25 percent to encourage investment and promote exports.
These taxes were reduced in the previous budget.