Malawi centre labels K901bn budget ‘throb into hearts of poor’
The Centre for Social Concern (CfSC) has described the 2015/16 budget as a throb into the hearts of the poor saying the K901 billion budget which will be raised locally except for K40 billion, leaves people with no choice but to wonder where the government will get resources to deliver its promises.
In a statement issued yesterday, CfSC said the Malawi Revenue Authority (MRA) has already been missing its targets in recent months, which is a clear sign of a narrowing revenue base in the country.
The organization attributes MRA challenges to instability in the business environment which is worsened by unfavourable tax and interest regimes.
“Ironically, the government keeps on promising its people large fertiliser, cement and iron sheets subsidies regardless of this shrinkage in the national purse. Even more, the budget has done little to stimulate growth and create employment as the recurrent budget is almost twice the size of the development budget,” the statement reads in part.
According to the statement, which has been released together with the CfSC’s April Basic Needs Basket, it is not strange that the government has decided to introduce a 10 percent excise duty on text messaging and data to make up for the huge financing gap in the budget which is not only unjustifiable but also very retrogressive.
It said the internet has become a popular tool in the current business infrastructure with banks, companies and academic institutions utilising huge amounts of data in their daily endeavours.
“Thus, this tax will increase the cost of doing business and it will be the poor Malawians who will carry the brunt as goods and services become more expensive.
In addition, in 2009 the World Bank estimated that 10 percent increase in broadband penetration would yield around 1.38 percent increase in GDP of low and middle countries, and if these are the statistics to go by, Malawians risk losing a lot due to this tax,” the statement reads. CfSC also said the 10 percent salary increase, which has been given to the junior civil servants, is not enough considering the high cost of living in urban areas due to high levels of inflation.
“As of April 2015 the average cost of ‘Basic Needs Basket’ for major cities and towns in Malawi was at K120, 390. Evidently, this basket is beyond the reach of most junior civil servants whose salaries are meager hence this increment does not go far enough in helping them afford their basic needs,” it reads.
CfSC said to make matters worse, the junior officers’ salaries are heavily taxed at 30 percent, in a similar way as the highly paid in the country. CfSC said it believes that government should reform the tax structure so that the rich pay more tax than the poor by introducing a fourth tax bracket for the high salaries while lowering it for the lower salaries.
“Thus not losing out on revenue; because taxation is not only to raise revenue but also to reduce the gap between the rich and the poor,” the statement states.
The statement, however, commended the government for reducing Farm Input Subsidy Programme (Fisp) allocation from K59 billion to K40 billion and for the allocating some money for maize purchases. CfSC also said it recognises that in the present circumstances because of the freeze of direct budgetary support to produce a progressive budget is a balancing act.
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