Malawi Revenue Authority (MRA) missed the October K45 billion target by K3.9 billion, sending fears that government may struggle to finance this year’s K737 billion zero-aid budget.
Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has said this is not surprising because businesses are struggling due to the worsening economic situation.
The MRA October 2014 tax outturn published yesterday shows that although the revenue for the month was higher than the prior month after collecting K41.12 billion, it was nine percent below target.
The tax collection agency has explained that the poor performance in the outturn was due to under performance in all tax lines, except fringe benefits tax, company assessment, import excise and dividend tax.
However, cumulatively for the past four months, MRA has managed to collect gross tax revenue amounting to K152.73 billion, which is about two percent below target.
Against uncertain donor support, government is implementing a K737 billion zero-aid budget, which has forced Capital Hill to borrow from the domestic sources to finance a wide fiscal deficit.
This year, according to the budget statement, government has projected that tax revenues will increase to K470.1 billion compared to K388.4 billion last year while total revenues and grants are estimated at K635.6 billion with domestic revenues projected at K525.3 billion.
But with the industry set to shrink by about 1.7 percent, according to the Economist Intelligence Unit (EIU), analysts fear that government will struggle to collect tax revenue, which will affect financing of the budget.
According to the October 2014 tax outturn, income and profit taxes were about eight percent below a K22.77 billion target after collecting K20.87 billion.
Corporate tax, another important tax line for Malawi, also performed poorly with the authority missing the target by 13 percent, collecting K8.78 billion, according to MRA figures.
According to the report, the tax authority also missed its targets in excise tax, value added tax (VAT) and import duty.
MCCCI president Newton Kambala in an interview yesterday said businesses are struggling because of what is happening on the economic front such as the fall of the kwacha, aid suspension, high inflation rate and dishonest employees.
He warned that due to the shrinkage in the industry, employees would lose their jobs while the government will experience problems in collecting taxes and financing of the current zero-aid budget.
“Some businesses, especially small ones, will close shop while others will scale down. Authorities should change their attitude and should not concentrate on politics alone,” said Kambala.
MRA this year introduced the electronic fiscal devices (EFD), which are expected to prompt an increase in VAT by about 20 percent.