‘New tax measures aimed at enhancing revenue collection, promoting economic growth and ensuring equitable distribution of resources’

MP Susan Dossi, chairperson of Parliamentary Committee on Media, Information & Communications

* They are designed to create a fair and transparent tax system that supports national development goals

* It is essential for the public to understand new measures’ purpose, implementation and impact

By Duncan Mlanjira

The new tax measures that have become contentious from some section of the public are just amendments to the existing Taxation Act aimed at enhancing revenue collection, promoting economic growth and ensuring equitable distribution of resources.

This was attested to by chairperson of Parliamentary Committee on Media, Information & Communications, MP Susan Dossi during the meeting that Malawi Revenue Authority (MRA) organises annually to update the nation of the Authority’s latest developments.

Dossi emphasised that the new measures “are designed to create a fair and transparent tax system that supports our national development goals”, adding that MP it is essential for the public to understand new measures’ purpose, implementation and impact — thus the role of the media being vital to disseminate such.

In its presentation on income tax measures, MRA’s Domestic Tax Division highlighted some of the amendments to the Taxation Act in which Section 39 has been amended to state that funds that the private sector contributes as response to disasters will be allowable deduction on condition that the amount should be contributed through Department of Disaster Management Affairs (DoDMA).

This, according to MRA, is to monitor the expenses made in terms of cash cheque presented as proof as opposed to procuring relief items and donating straight to the beneficiaries.

However, the private sector is at liberty to bypass DoDMA but will be subjected to tax from the annual returns.

Section 39A has also been amended to add “as allowable deduction on amount of expenditure for construction of boreholes, water kiosk or other water facilities — with the amount allowable is 50%.

Previously, this section provided for contributions towards health and education but now includes provision of water and sanitation by the private sector.

Section 76A of the Taxation Act provides for chargeability of Non-Resident Tax and has been amended to delete the word, “having place of effective management”. This means services provided by foreign nationals are to be taxable even if provided from their countries of residence.

In Section 91B, it has been amended to state that commercial motor vehicle of seating capacity less than 33 including the driver should be paying taxes on quarterly basis — the chargeable fee at MK5,000 per seat per quarter.

In the Second Schedule, the amendment is to clarify that claiming of capital allowances for capital assets where the capital asset is subject to finance lease, the claim shall be transferred from the lessor to the lessee.

In the Eleventh Schedule additional tax of 10% will be charged on any taxable income above MK10 billion kwacha in which paragraph (h), the amendment has deleted the word “earnings” and replaced with “return” under paragraph (h).

The replacement of the word “earning” is because it was not well aligned with the paragraph as provided in the Taxation Act. Section 2 of the Taxation Act on “earnings”.

On employment rates, under the same Eleventh Schedule, annual taxable income is 0% deduction for the first K1.8 million; with next K4.2 at 25%; next K24.6 million at 30% and excess of K30.6 million at 35%. For business income, the first K1.8 million is at 0% while the excess of K1.8 at 30%.

Amendment to the Fourteenth  Schedule has affected the following paragraphs:

* Paragraph (c) – being payment for any supplies to traders or institutions at 3% where there is a note to state that “the rate will not apply to supply of food”;

* Paragraph (e) – deleting individual banking agents and substituting with “individual agents recruited by an e-money service provider”. The rate of 1% will be final tax;

* Paragraph (g) – substituting with payment for farm produce at a rate of 1% and will be final;

* Paragraph (I) – substituting with subparagraph (i) interest realised from investment of life assurance premiums and pension contributions at 15% and (ii) others at 20%”.

On value added tax (VAT), Section 11 has been repealed — removing the mandatory requirement for VAT registration of importers of services while Section 25 (1) has been amended by deleting “taxable” and substituting “a supply of goods and services”. The deletion means that every supply should be captured on fiscal receipt.

The First Schedule has been amended by repealing paragraph (9) — introducing VAT on electric motor vehicles.

On electronic tax is to do with invoicing system aimed at replacing the EFD system with the current amendments are replacing all section where there was EFD machine with Electronic Tax Invoicing System.

There will be a separate gazette on the effective date of the system, whose effects are on Part II of both the Taxation and VAT Act Amendments.

MRA contends that the amendments are periodically made in order to move with economic trends having consulted with various stakeholders and for these measures to be effective, MP Dossi said it is essential the public understands their purpose, implementation and impact — thus the role of the media being vital.

Since the announcement of the amendments to the Taxation Act, a section of the public expressed their outcry, blaming MRA for heavy handedness in taxation but MRA contends that its role is to implement the law as enacted by Parliament.

MRA Commissioner General, John Biziwick maintains that if the public is unsatisfied with some clauses of the Taxation Act, they can petition Parliament and not the implementors, stressing that MRA cannot circumvent the law of the Republic.