Malawi targets a 5% GDP growth on domestic revenue

By Wahard Betha

Malawi has launched a Domestic Revenue Mobilization Strategy (DRMS) aimed at improving the country’s revenue collection capacity.

Speaking during the launch of the strategy, Finance Minister Felix Mlusu said the DMRS will contribute to an increase of 5 percentage points to the country’s Gross Domestic Product (GDP) ratio in the first year – 2021-2022 – of its five-year life span.

At the current 13.4 percent, Malawi’s domestic revenue ratio is amongst the lowest in the Southern African Developing Countries (SADC) region and compares negatively to the Sub-Saharan average of 16 percent.

Mlusu said through the strategy, Malawi will achieve its desired level of development by increasing the current ratio to about 17 or 18 percentage points so that it levels with both the SADC and Sub-Sahara averages.

He explained that the strategy was designed to support the “Malawi 2063’’ national vision of creating an inclusively wealthy and self-reliant nation.

“This is a reflection of Government’s continued commitment to collect enough revenues to support the country’s development agenda,” he said clarifying that while the strategy promotes increased revenue collection, it removes redundant tax exemptions to ensure an inclusive private sector-led growth where the tax burden is evenly spread on all citizens.

Mlusu said the strategy will also help in improving country’s overall revenue mobilization efficiency and effectiveness through automation and modernization of tax and non-tax revenue collection systems; widening the tax base; building a culture of tax compliance; improving transparency; developing skills and tools for tax policy analysis and reforms for the tax administration.

The minister further called on the citizenry to join hands with Government and ensure that the country regains control of its national budget through an increased revenue basket even when the world is reeling from the effects of Covid-19 pandemic as well as the effects of climate change.

“I challenge you to find a role and play it to the best of your abilities,” Mlusu said.

In his remarks, National Planning Commission (NPC) Director General Thomas Munthali said the strategy will help the Commission to access resources needed for the implementation of the Malawi 2063 Agenda.

“This DMRS will help us mobilize the needed resources and meet the goals set for the next 10 years, which requires an estimated 15 billion USD” he said pointing out that the strategy will see the country move away from relying on debts and donations and start implementing development plans from its own coffers.

The Malawi Revenue Authority (MRA) Board Chair Vizenge Kumwenda, also lauded the development saying it provide a blueprint on how best the Authority can boost domestic revenue collection.

Domestic revenue mobilisation faces challenges such as policy instability, an over generous tax incentive regime; outdated tax legislation; manual tax collection system; weak business intelligence; low taxpayer compliance; porous borders facilitating smuggling; weak institutional capacity; and a cash based economy

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