Minister of Youth and Sports Ulemu Msungama says he is negotiating with government to consider offering tax incentives for companies that sponsor sports.
He hopes this would attract more companies to invest in sports development.
Msungama said the move comes after the tax relief issue was highlighted as one of the reasons the corporate world shun sponsoring sports in the country during a recent stakeholders meeting which was organised by Malawi National Council of Sports Council (MNCS) to understand why the corporate world is shunning sports sponsorship.
Said the minister: “The process is currently at a foundation stage where I have started engaging stakeholders and authorities on how to go about it.”
Currently, companies that bankroll sports are subjected to a 30 percent tax on the sponsorship amounts. In addition, they pay relevant taxes such as Value Added Tax (VAT) when procuring sports equipment for sponsorships.
For a long time, there has been a cry over government’s failure to introduce tax incentives for sports sponsors.
During Football Association of Malawi (FAM) executive meeting held in Mzuzu in 2013, it was resolved to approach the government through Treasury to consider waiving tax on football sponsorship. This came after discovering that government subjects companies to taxes in relation to revenue spent on sponsoring football on top of denying them tax waiver, but to no avail.
The corporate world and sports bodies have welcomed the latest push for tax relief by the new Minister, saying it will make the local sports industry vibrant.
FDH Bank plc head of marketing and communication Levie Nkunika, whose entity is the country’s biggest sports sponsor, said any tax waiver on sponsorship and procurement of sports related equipment would be appreciated as it would increase the amount of support that directly impact sports disciplines.
Last year, the home-grown bank unveiled a K450 million five-year sponsorship for a national elite football league cup on top of the K180 million three-year sponsorship for the senior football national team, the Flames.
It also came up with K360 million three-year netball. The bank also sponsors Mayor’s football and netball trophies for primary schools to the tune of K55 million.
“As a home-grown bank, we are strong partner to the people and the government. Tax incentives would be welcome as it would encourage us to do more on sports development. It will even prompt us to increase sponsorship,” Nkunika said.
NAM president Khungekile Matiya yesterday said the push for tax incentive would liberate netball as more companies would come to support the sport.
“Netball is the sport that is doing well in the country in terms of performance on the international stage, but most companies are not forthcoming to sponsor us. Therefore, tax incentives would really motivate and attract more companies to support us,” she said.
On his part, Basketball Association of Malawi general secretary Peter Gomani said: “This is a great initiative by our minister looking at how many companies at the moment are not interested to sponsor sports as compared to the past. If it works out, more companies would join a few companies that are already sponsoring different sporting disciplines.”
“On the other hand, athletes will be motivated if the stakes of what they are fighting for increases and that would result in the improvement of their livelihoods and sports growth. Many companies that sponsor or have potential to do so, already pay heavy taxes and that has always been a challenge.”
Sports analyst and marketer George Kaudza Masina said much as tax waiver can be used as an incentive for potential sponsors, government has to approach the move with caution.
“The waiver should not be done wholesale to stifle government at large and benefit the sponsors or would-be-sponsors much. Most governments that have used tax waiver to attract sponsorship restrict the same to the sponsorship money, which is not taxed and not the entire income purse,” he said.
“The tax incentives should also be categorised as to which tax to qualify for waiver such as the VAT. All the same, let the minister push for the tax relief as it will be beneficial to the entire sports fraternity. Companies and organisations will have little to argue for not rendering the corporate social responsibility through sports sponsorship in Malawi.”