Non-tax revenue in subdued performance

The fluctuations and underperformance in non-tax revenue has come under the spotlight with a Blantyre-based tax expert indicating that it is a reflection of the country’s subdued economic performance and inefficiencies in government.

Tax expert Emmanuel Kaluluma, who is senior tax consultant at EK Tax Consultants, said this in reaction to Reserve Bank of Malawi figures which show that non-tax revenue collections are underperforming.

The figures show that non-tax revenue in the first four months of the 2021/22 financial year stood at K19.2 billion, way below the 2021/22 fiscal year projection of K69.6 billion, representing an underperformance of about 72 percent.

While non-tax revenue which includes departmental fees, parastatal dividends, road tax, rural electrification and road levies, have been on the downward spiral, tax revenue has over the same period sustained a strong performance, amounting to K434.8 billion.

Kaluluma, who has previously worked as commissioner of tax at Malawi Revenue Authority, said in an interview on Tuesday that declining non-tax revenue collections confirm that the economy is not performing well.

He said the situation also signals inefficiencies on the part of government ministries, departments and agencies that collect non-tax revenue.

“While the Covid-19 pandemic has taken a toll on the economy, leaving businesses in a difficult position which has translated to less production thus less taxes, there is also corruption within our systems,” Kaluluma said.

In a written response on Wednesday, Ministry of Finance spokesperson Williams Banda, while admitting the underperformance, said revenue collections are seasonal such that a month-to-month analysis of their performance can or does not give a good picture.

“It is true that non-tax revenues are not performing while tax revenues performed better during the time in question,” he said.

Banda said non-taxes were affected by Covid-19, with the Department of Immigration and Citizenship Services, Department of Civil Aviation and non-remittance of dividends by State-owned enterprises contributing to the lower- than-expected outturn.

But he was upbeat that non-tax revenue will perform well going forward due to enforcement and the relaxation of some Covid-19 measures.

“Suffice to say, a huge underperformance may result in prioritisation of resources and effective use of resources, including cutting down on some expenditures, but the ministry  is monitoring  the economic  situation to ensure that there is no huge impact on the budget,” he said.

The 2021/22 National Budget is facing mounting pressure, with increases in domestic revenues being outweighed by expenditure overruns.

For instance, in the first four months of this financial year, figures show that revenue collections amounted to K499.2 billion while expenditures stood at 701.7 billion, creating a deficit of K202.5 billion.

In its December 2021 Malawi Economic Monitor, the World Bank urged Treasury to balance strengthening revenue mobilisation with implementing policies to support growth.

In this fiscal year, Treasury projects tax revenues at K1.116 trillion, or 12 percent of the gross domestic product while other revenues are estimated to close at K69.6 billion.

Treasury is this fiscal year projecting a budget deficit of K723.8 billion, a rise from K718 billion recorded in the previous financial year.