Public tax collector Malawi Revenue Authority (MRA) has attributed under collection of tax to prolonged electricity power outages which have crippled production in the economy.
In his address to members of Parliament (MPs) under the Budget and Public Accounts Cluster reviewing the proposed 2018/19 National Budget in Lilongwe, MRA commissioner general Thom Malata said the electricity problems have negatively affected production of most businesses, leading to a reduction in importation of raw materials on which value-added tax (VAT) is payable.
He also said domestic excise has not been spared the impact of outages.
Said Malata: “Power outages have affected revenue collection as there is reduced importation of raw materials on which VAT is payable. The [power] outages have a negative impact on production of the industries and consequently on forecasted profits on which provisional tax is based.”
Besides electricity problems, the MRA boss mentioned fraud as worsening the situation as it cost the public tax collector about K7.2 billion in potential provisional tax after some commercial banks lost K24 billion in loans.
During the 2017/18 financial year expected to end on June 30, MRA was given a target of K896. 7 billion and had, as at the end of April 2018, collected K704.5 billion against a target of K733 billion. This represented a deficit of K29.2 billion.
In his 2018/19 Budget Statement presented in Parliament on Friday, Minister of Finance, Economic Planning and Development Goodall Gondwe acknowledged that prolonged electricity outages remain an impediment to private sector growth and economic activities.
He said government has embarked on projects, including facilitating interconnection with Zambia and Mozambique, to improve the situation.
Said Gondwe: “In order to improve electricity generation, supply and distribution systems, government through Ministry of Natural Resources, Energy and Mines is facilitating the interconnectors programme.”
In its Economic and Fiscal Policy Statement, government outlined that it plans to improve and expand electricity generation capacity, power transmission and distribution systems. Among others, it says it will proceed with construction of Tedzani IV hydro power plant expected to add 18 megawatts (MW) to the grid and construct grid-connected solar power plants of 70MW.
Under Vote 273 in the proposed 2018/19 National Budget, K27 billion is allocated for the project.
In the financial year to roll out on July 1, MRA has been tasked to collect K940 billion representing eight percent growth from the 2016/17 revised budget.
In recent years, Malawi has been facing erratic power supply which the Electricity Supply Corporation of Malawi (Escom) and Electricity Generation Company (Egenco) have largely attributed to reduced water levels in Lake Malawi and its sole outlet, the Shire River.
Some hydro power stations, including Nkula A, are also out of service undergoing rehabilitation, a development that further reduced the 350MW-capacity by 24MW.
To avert the situation that, at worst, saw Malawians experiencing 25-hour power blackouts, Egenco and Escom procured diesel-powered generators expected to add 70MW. However, the generators do not run around the clock.