Finance Minister Sosten Gwengwe
* A number of taxpayers complained that VAT is affecting their business and thus the government saw merit in that
* Government aims to reduce tax burden on the low and middle-income
By Duncan Mlanjira
Value added tax (VAT) that was factored to years ago, which was attributed to have contributed to the increase of the commodity, has been scrapped off.
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This is contained in Finance Minister, Sosten Gwengwe’s Budget that was presented in Parliament on Friday in which he also abolished VAT on household tap water.
He said the Ministry abolished the withholding VAT system because a number of taxpayers complained that it is affecting their business and thus the government saw merit in that.
He said in general, the government aims to achieve in the next fiscal year to reduce the tax burden on the low and middle-income individuals; expand the tax base and seal loopholes in the tax system.
It is to encourage voluntary tax compliance and automate most of the function undertaken in Government Ministries, Departments, and Agencies (MDAs).
“In terms of income taxes, we have made slight changes to the Pay as you earn (PAYE) structure, introduced a rebate for withholding tax in the gaming industry.
“For Customs and Excise measures, which will be effective midnight tonight, we have made a number of changes including the removal of import duty and excise tax on sanitary pads and some solar products.
“We have also reduced the value addition requirement to be admitted in the Industrial Rebate Scheme where import duty and import excise is not paid from 35% to 5% for SMEs and special sectors such as pharmaceuticals, and from 35% to 10% for all companies producing for local consumption.
“The threshold for export companies remains at 35% since this is the agreed value addition for our products to receive special treatment in the COMESA countries.
“In short, these are the key tax and non-tax measures that I have proposed in Parliament today. My Ministry is producing a Gazette Notice on the Customs and Excise measures and Bills will be submitted to Parliament for the income tax and VAT measures.
“It is my hope that all honorable members and the general public will support these proposals,” he said in his highlights to the MPs.
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The Malawian Economy
The 2021 country’s economic growth is being projected at 3.9% from 0.8% in 2020. In 2022, the economy is expected to grow by 4.1% while in 2023 it is expected to grow by 4.0%.
This is on account of anticipated subdued impact of CoVID-19 pandemic, translating into increased economic activities.
In 2022/23 inflation rate is projected at 9.1%. Government will continue to pursue its monetary policy objective of attaining a headline inflation rate of 5.0% by 2025.
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Budget Framework
The 2022/23 budget is 42% higher than the 2021/22 budget. The increase is on account of normalisation of the financial year from 9 months to 12 months.
Total Resources
Total revenues and grants for the 2022/23 financial year are estimated at K1,955.85 billion (17.2% of GDP) comprising K1,635.52 billion in domestic revenues and K320.33 billion in grants.
Out of the projected domestic revenues, tax revenues are estimated at K1,527.75 billion representing 93.4% of total domestic revenues. Other revenues are estimated at K107.77 billion representing 6.6% of the total domestic revenues.
Grants from development partners are estimated at K320.33 billion representing 16.4% of the total revenues.
In 2021/22 financial year, total revenues were projected at K1,271.3 billion. The projected likely outturn for the year is at K1,240.0 billion. The underperformance is on account of lower than planned grants.
The likely outturn for Grants is projected at K139.0 billion against a planned disbursement of K170.3 billion. As for 2022/23 financial year, total revenues are projected at K1,955.85 billion of which domestic revenues are at K1,635.5 billion and grants are at K320.3 billion.
Expenditure
In 2022/23 financial year, Government expenditure is estimated at K2,839.89 billion (24.9% of GDP). Of this amount, K2,019.21 billion are recurrent expenses while K820.67 billion is for development expenditure.
The total development expenditure of K820.67 billion will be financed by K580.93 billion from foreign resources and K239.74 billion from domestic resources. In 2021/22 financial year, total expenditure was projected at K1,995.10 billion.
The likely outturn is projected at K2,064.90 billion. The increase in expenditure is on account of more than planned salary adjustment and critical expenditure needs in MDAs.
Budget Deficit
In 2022/23 financial year, budget deficit is projected at K884.04 billion (7.7$ of GDP). The deficit will be financed by foreign borrowing amounting to K230.07 billion (earmarked for projects) and domestic borrowing amounting to K653.98 billion.
