Treasury’s plans to cut non-tax revenue projections in the 2018/19 financial year could stifle government’s efforts to diversify revenue base amid declining foreign aid, economic commentators have warned.
Non-tax revenue, which includes collections of fees from issuance of passports, drivers’ licences and other services offered by government ministries, departments and agencies (MDAs), has been revised downwards by about 15 percent from the approved K112.2 billion to K96.6 billion.
While the Institute of Chartered Accountants in Malawi (Icam) says there is need to establish the cause and solutions to the poor performance of non-tax revenue, University of Malawi’s Chancellor College economics professor Ben Kaluwa feels failure to rectify the situation could negatively affect government’s tax revenue base.
Icam chief executive officer Francis Gondwe, in an interview yesterday, urged government to investigate the poor performance on non-tax revenue and come up with lasting solutions.
“This is more relevant now considering that, as a country, we want to predominantly rely on domestic resources,” he said.
On his part, Kaluwa said continued poor performance and downward revision of the revenue line could mean failure by Treasury to diversify its revenue base.
He said: “While non-tax revenue is not big for Malawi, growing it could mean more diversified sources of domestic revenue for the economy because relying on the taxpayer is not always good.
“A limited base for non-tax revenue means some sectors of the economy are constrained, which is not good for the tax revenue base. We need to look at the composition of this revenue line item by item and see how best we can grow the revenue base.”
The revision of the non-tax revenue has led to the downward revision of domestic revenue from K1.052 trillion to K1.036 trillion, according to the Mid-Year Budget Review Statement Minister of Finance, Economic Planning and Development Goodall Gondwe presented in Parliament on Friday.
In 2014, in a bid to raise more from non-tax revenue, Treasury announced a number of initiatives, including a 300 percent increase in permits and citizenship fees while passports were raised by 320 percent.
In the same year, Treasury also increased vehicle certificate of fitness (CoF) by about 600 percent while other services at the Directorate of Road Traffic and Safety Services were raised by about 300 percent.
Treasury figures indicate that during the first half of the 2018/19 fiscal year, Malawi Revenue Authority (MRA) performance improved sharply with tax collection overperforming by five percent or K22.4 billion.
Non-tax revenue, on the other hand, underperformed by K3.7 billion.
Tax consultant, Emmanuel Kaluluma, who is also senior tax consultant at Blantyre-based EK Tax Consultancy, blamed lack of control and abuse for poor performance of non-tax revenue.
He said there is need for proper management and improved efficiency for a turn-around.