Former minister of Finance Joseph Mwanamvekha says the optimism expressed by the Malawi Revenue Authority (MRA) in achieving the K3.26 trillion target is interesting and self-defeating.

In a written response on Wednesday, Mwanamvekha, who also served as Secretary to Treasury and is the Democratic Progressive Party (DPP) spokesperson in finance, observed that while the jump in revenue projections is unrealistic and untenable, the measures that MRA wants to pursue in 2024/25 are routine in nature, not new and may not generate additional tax revenues.

He said: “Normally, domestic revenues grow with a growing economy. As alluded to earlier, the assumption that the economy will grow by 3.2 percent in 2024 and 4.8 percent in 2025 is completely overly ambitious as all economic indicators point to a continued slowdown in the economy.

“Furthermore, with increasing food and non-food inflation outlook, monetary authorities will have no choice but to respond by further tightening monetary policy stance which will further limit growth in the economy and subsequently revenues. With the unabated pressure on the exchange rate and reserves, the kwacha will continue to lose ground against all major currencies of the world. This will seriously affect customs and tariff revenues.”

MRA staff clear customers’ goods

Mwanamvekha observed that as a consequence, most of the vatable goods are imported and VAT collections on those goods may edge downwards in 2024/25 fiscal year taking into account the prevailing shortage of foreign exchange which, in turn, will negatively affect importation of goods and services.

He said: “Thirdly, we hope MRA will agree with us that most of the VAT collected in 2023/24 was inflationary, meaning they collected slightly more in 2023/2024 fiscal year due to increases in prices of goods and services. Does MRA expect inflation to rise by a similar magnitude in 2024/25? We don’t think so.

“Our suggestion is for MRA to expand the tax base rather than depending on the same measures and same taxpayers. The current macroeconomic situation is more growth-suppressing than growth-stimulating.”

To attain the 2024/25 tax revenue targets, MRA commissioner general John Bizwick told journalists on Wednesday that the public tax collector is banking on rationalisation of audits (K27.92 billion), debt collection (K8.6 billion), third-party matching (K20.53 billion), tax stamps (K411.25 billion), finalisation of court cases (K37.38 billion), enhancement of guide values for some products including kaunjika (K25.91), VAT and electronic fiscal device management (K24.81 billion) and finalisation of on-going investigations cases (K10.22 billion).

Bizwick said MRA is also banking on duty-free inspections (K7.15 billion), government compliance (K3.42 billion), collection of mineral loyalties (K2 billion) and collection of rental income (K2 billion).

He said: “If you look at our performance for the past three years, we have grown tax collections by about 36 percent. So, if we continue growing at that rate, we should be able to hit at least K2.99 trillion

“But as we are going there, MRA is implementing certain reform projects which are supposed to bring in efficiency in the way we operate. So, that should be able to bring us an additional K260 billion.”

Madam Speaker, total revenue and grants for the 2024/2025 fiscal year are estimated at K4.55 trillion, representing 24.3 percent of GDP. Domestic Revenues are estimated at K3.38 trillion, representing 18.1 percent of GDP, of which, tax revenues are estimated at K3.26 trillion and Other Revenues have been projected at K126.54 billion.

The post MRA revenue reforms Under scrutiny first appeared on The Nation Online.

The post MRA revenue reforms Under scrutiny appeared first on The Nation Online.