MRA downplays devaluation impact on revenue collections

Public tax collector Malawi Revenue Authority (MRA) has allayed fears that the devaluation of the kwacha could exert pressure in some tax lines, saying it will instead boost revenue collections.

The Reserve Bank of Malawi (RBM) last week devalued the kwacha by 25 percent against the dollar. 

The devaluation, which according to the central bank is necessary to align the foreign exchange supply to the macroeconomic fundamentals as well as ensure supply in the formal market, practically means the local unit has fallen to K1 030 per dollar from the previous K825.

But, in an interview on the sidelines of a media interface on Wednesday, MRA commissioner general John Bizwick indicated that the development should not affect revenues as it has only made forex necessary for trade available.

Said Bizwick: “What this devaluation will do is that over time, actually immediately, it will assist businesses because forex will now be available to assist businesses get funds for their purchases.”

According to Bizwick, with about 30 percent of Malawi’s revenue collection coming from trade taxes, the expectation is that with more forex, there will certainly be more imports and more taxes for the MRA. 

Meanwhile,Malawi Confederation of Chambers of Commerce and Industry (MCCCI) president Lekani Katandula has said businesses are hopeful to see an improvement in forex supply, observing that the move has been long overdue.

Economists have also indicated that the availability of forex could translate to improvement of trade taxes as a result of an improved cross-border trade which will  mean that MRA will collect the much needed revenues for this financial year.

In the 2022/23 financial year, the government is projecting total revenues and grants for the 2022/2023 fiscal year are estimated at K1.956 trillion representing 17.2 percent of Gross Domestic Product (GDP).

Of the K1956 trillion, domestic revenues are estimated at K1.636 trillion, of which tax revenues are estimated at K1.528 trillion while other revenues have been estimated at K107.8 billion.