More pain as tax revenue shrinks

Economic commentators have decried the continued underperformance of public tax collector Malawi Revenue Authority (MRA) at a time the economy is in bad shape and government badly needs money to provide social services.

The shrinking tax revenue base is likely to hurt the poor more as government struggles to fund basic public services as well as the economy in general as public investment falls sharply.

With just one month to go before the end of the first-half of the financial year, MRA has reported a K7.05 billion ($11,675,700) shortfall, a position that puts government projections off course.

In a performance report published on Tuesday, MRA said it collected K53.03 billion ($87,824,500) in October 2015 against a target of K55.97 billion ($92,693,500), missing its target by five percent.

The revenue agency collected K18.35 billion ($30,390,000) under the taxes on goods and services, a K2.88 billion ($4,769,650) deficit of the set K21. 22 billion target.

In the month under review, K4.75 billion was collected through corporate tax, which was K2.06 billion below its projection.

MRA said company assessment tax also fell short by K72.76 million, translating to 11 percent underperformance having collected K661.15 million during the period.

Some experts have described the targets set for the tax collector as ‘unrealistic’. The International Monetary Fund (IMF), in its recent assessment, also advised Malawi to revise downwards its budget and revenue projections to reflect the economic situation on the ground.

In an interview on Tuesday, economic commentator Edward Chilima observed that the tax collector must have raised its bar too high, hence missing the projections.

He said MRA targets are not practical, arguing that the tax collector should consider setting targets that correspond with the current situation.

Chilima also noted that there might be inefficiencies or that some people may also not be remitting taxes, advising the authority to evaluate the system.

But Chancellor College economics professor Ben Kaluwa attributed failure for the tax collector to meet the targets to unsettled arrears of government to the private sector, saying this depresses industry players.

He noted that there is less spending of people and that consumers are buying less from businesses, which in the end is relatively affecting the revenue collection.

“If Malawi, just like other countries, had a barometer that measures the economic performance by how people spend, it could be revealed that private sector has been depressed, a situation which impacts negatively on the economy and revenue collection,” he said.

Earlier this year, Economics Association Malawi (Ecama) president Henry Kachaje said meeting targets would require a more robust strategy that gradually increases tax base.

He cautioned that it will be a challenge to raise more revenue domestically considering that many businesses might not perform well in the first quarter of this year due to the negative impact of the floods on the economic performance. n