- Wants govt to be more aggressive
Lilongwe-based Centre for Social Concern (CfSC) has called for aggressive action by authorities in enforcing tax on rentals in the forthcoming 2015/16 ‘intellectual’ budget.
“The tax on rentals [house rentals] has been a talk for a long time. But it is time that the policy be implemented effectively,” said CfSC economic governance expert Mathias Kafunda yesterday.
The suggestion, according to Kafunda, is part of the faith-based institution’s input into the next national budget.
According to the Malawi Revenue Authority (MRA), rentals are a kind of passive income for a person who is a property owner and a recipient of rentals and is required to pay tax on this kind of income.
Referring to Section 11 of the Taxation Act, rental income becomes assessable income if a person is received by or accrued to or in favour of the recipient in any year of assessment from a source within or deemed to be within Malawi.
As such, property owners who let out their properties are obliged to register themselves as taxpayers for income tax purposes, keep accurate and up-to-date records for the rental business, declare rentals received in an income tax return, self-assess themselves and pay tax at the nearest tax office.
But Kafunda said CfSC believes there are people that own property and “are not adequately in the tax issue,” but can legally contribute to revenue generation.
“The departments of lands and city council have proper registration of properties; it will be a good start if seriousness is put into having an implementation of this policy,” he reasoned.
Business News understands that the administration of rental income tax is still not thorough such that CfSC estimates that probably more than 50 percent of property owners and land are using them for rental purposes, but are not able to contribute their taxes to government.
“We are saying government needs to find ways of broadening the tax base and one way is to ensure that any person who can legally contribute to revenue generation by government must actually be included in the revenue generation basket,” added Kafunda.
Speaking separately, a Blantyre-based tax expert Emanuel Kaluluma concurred with Kafunda on Friday, saying there is a need to see that all passive income such as rentals is properly subjected to tax.
Kaluluma said the majority of earners of rent and bank interest are at top tax rate bracket; hence, need for enforcing the law to have them comply and pay rental income.
MRA spokesperson Steve Kapoloma, while acknowledging the sensitivity of the matter, yesterday had not responded to our questionnaire on the same as we went to press.
During a recent pre-budget consultation meeting in Lilongwe, Gondwe said government would take on board some key input into the budget, saying other suggestions would be considered in the subsequent national budgets.