The Institute of Chartered Accountants in Malawi (Icam) has cautioned the government on rising public debt to finance the yawning K754 billion-budget deficit for the 2020/21financial plan.
Of the amount, K530 billion would be sourced from the domestic market while K224 billion would in a form of foreign debt.
This was said Tuesday when the institute presented its views for consideration by the Treasury in the 2021/22 National Budget.
Icam Vice President Moffat Ngalande said the experts were bothering that much of the borrowed money is mean consumption not production.
“Any debt towards consumption is costly and likely to cripple the economy,” he said.
Icam has also urged the Treasury to consider reviewing some tax policies when crafting the next budget.
The institute has since asked the Treasury to consider speeding up tax integration system for Small and medium Enterprices (SMEs) to start paying taxes.
It suggests making Value Added Tax on cooking oil zero-rated.
Ngalande then urged Minister of Finance Felix Mlusu to extend the voluntary tax window to December 31, 2021 as most businesses were yet to recover from Covid effects.
He said businesses are likely to continue struggling for unforeseeable period due to the first and second wave of the pandemic.
“To keep some tax liabilities in check such as PAYE [Pay As You Earn], companies may be forced to retrench staff in order to remain afloat,” he explained.
The institute has further recommended for the government to adopt the ‘business unusual’ approach, by for example, reducing size of Cabinet and number of principal secretaries.
In his reaction, Mlusu said the views would be reviewed for consideration to form part of the next budget.
“Obviously, these must be both sides, not just on the side of government, but also on the side of the general public – the stakeholders. We want to come up with a budget that is all inclusive,” he said.
Mlusu further said there was a need to critically relook at the taxes that apply for the small and medium enterprises stressing that the intention “must not be to penalise” the small businesses but to promote them.
He said it was the wish of the government to see the small businesses grow and start paying taxes.
The consultations would run through Thursday when there will be a live broadcast to give the public a chance to contribute.
Mathews Kasanda is a Journalist who has recently joined Times Group Newsroom as an Intern. He is an outstanding media practitioner and in 2014, Media Institute of Southern Africa awarded him the Best Print Media Education Journalist of the Year accolade.