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Government hailed for progressive tax strategy

While government is being commended for adopting a progressive taxation strategy in the 2017/2018 national budget, some experts have also asked government to tighten tax compliance and develop other industries to boost the resource envelope.

A progressive tax is a tax that takes a larger percentage from high-income earners than it does from low-income individuals.

Presenting the 2017/2018 national budget to Parliament last Friday, Finance Minister Goodall Gondwe announced new tax measures that included the introduction of 10 percent local exercise on television subscriptions and the introduction of a new Pay as You Earn tax bracket of 35 percent for those earning K3 million and above.

Reacting, tax expert Emmanuel Kaluluma said the challenge for government is not widening the tax base but to ensure that those that are already in the tax net are paying taxes as due.

He said by said continuing to lump more taxes on those that are earning more is tantamount to “milking an already thin cow”.

“If the law was enforced, there are a lot more areas where we can get revenue,” he said.

In his speech to Parliament, Gondwe said the new tax measures are meant to improve administrative efficiency, encourage tax compliance and broaden the tax base in order to generate adequate domestic resources.

“In the just ending fiscal year 2016/17, the Malawi Revenue Authority (MRA) has demonstrated an exceptional performance by collecting tax revenues beyond our estimates and I therefore, would like to commend Malawians from various sectors for honouring their noble duty of paying taxes honestly.

“We are optimistic that the exceptional performance demonstrated in this fiscal year will continue in the 2017/18 budget,” he said.

But Kalululuma said the successful implementation of the budget will be dependent on the MRA consistently meeting its targets and putting in place measures to encourage tax compliance.

“It will be important for MRA to maintain the team it has had in the past 10 to 12 months,” he said.

In a separate interview, Chancellor College Economics Professor Ben Kalua commended government for being cautious not to put too much pressure on the private sector to stimulate economic growth.

But Kalua said government needs to do more to identify other revenue sources such as developing the tourism sector.

“Government now realizes that we need to attract more Foreign Direct Investment but we can do better. The hospitality sector is still neglected yet in other countries it is a key source of revenue,” he said.

The 2017/2018 budget is pegged at K1.29 trillion and according to Gondwe, has been designed to maintain macroeconomic stability and to jumpstart a robust sustainable economic growth.

This particularly means that to grow, we must maintain the austerity measures that are leading to macroeconomic stability and discernible of economic growth. Government is targeting a growth rate of seven percent per year.

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