Taxation consultant Misheck Msiska says the newly introduced tax measures in the proposed 2020/21 National Budget will help to promote local businesses and create jobs.
In his virtual presentation yesterday during the Post-Budget Online MasterClass organised by the Institute of Chartered Accountants in Malawi (Icam) on tax measures, he said, for instance, the introduction of 10 percent surcharge on exercise books, text books, blankets, confectionery, stick matches, opaque and clear beer, dressed chickens and eggs will support local manufacturing and create jobs.
Msiska said the review of industrial rebate scheme, value addition for qualification into the scheme from 20 percent to 35 percent in line with Common Market for Eastern and Southern Africa (Comesa), will encourage domestic production and exports.
He said the introduction of excise tax stamps on spirits, wines, opaque and clear beer will discourage smuggling and curb unfair competition for local manufacturers while an excise tax reduction on opaque beer from 40 percent to 30 percent would help promote employment and support local maize, millet and sorghum farmers.
While observing that Treasury has not effected value added tax (VAT) measures, Msiska emphasised the need for tax authorities to clarify on some tax measures.
“Proposals for standard rate, zero-rating and exemption for VAT were acknowledged, but not implemented for the 2020/21 fiscal year due to the disruption caused by the Covid-19 pandemic,” he said.
In his presentation, Malawi Revenue Authority (MRA) head of corporate affairs Steven Kapoloma said the tax measures are also meant to enhance import substitution and revenue although there is potential revenue leakage for some lines.
He said: “Exercise tax stamps is tricky area because we have learnt from the cigarette tax stamp that other cigars were being sold on the market without stamps and this is an area we are looking at. We might take a little time to implement this.”
In his budget statement presented in Parliament on Friday in Lilongwe, Minister of Finance, Economic Planning and Development Joseph Mwanamvekha announced new customs and excise tax measures which became effective at midnight on June 12 2020.
He said that tax revenue has dropped from an average of K90.8 billion per month during pre-Covid-19 period to a monthly average of K59.1 billion during the post-Covid-19 period, representing a 35 percent decline.
In this regard, Mwanamvekha said the outlined tax revenue measures aim at enhancing revenues while ensuring that a conducive environment is created for businesses to recover and provide some cushion to individuals.
In the 2020/21 fiscal plan, domestic revenues are estimated at K1.215 trillion. Of this amount, tax revenues are estimated at K1.152 trillion, representing 16.1 percent of gross domestic product while other revenues have been estimated at K63.2 billion.
The Covid-19 pandemic and post-election violence have slowed down businesses, resulting in a decline in both tax and non-tax revenues against increasing expenditure requirements.