Government has proposed a new incentive to Ministers and Members of Parliament to have their duty-free vehicles disposed of without customs and exercise duty, a move a taxation expert has questioned.
In a letter dated May 21 2020 Minister of Finance, Economic Planning and Development Joseph Mwanamvekha proposes that there should be amendment to regulations to have the duty-free vehicles disposed without customs and xercise duty.
“Treasury would like to advise the Malawi Revenue Authority that motor vehicles procured by Cabinet ministers and members of parliament under CPC 419 and CPC 420 of the Customs and Exercise (Tariffs) order, respectively , will now be disposed of without payment of duty upon the expiry of the term of office. This will be applied beginning with the 2019-2024 cohort of ministers and members of Parliament.
“Kindly note that the corresponding Regulations under the Customs and Exercise (Tariffs) Order will be amended accordingly to facilitate implementation,” reads the letter in part.
Ministry of Finance spokesperson Williams Banda said the letter is based on a proposal coming from Parliament.
Banda said: “This will apply only to this current cohort [2019-2024] and will not apply retrospectively.”
Malawi Revenue Authority (MRA) spokesperson Steven Kapoloma said Treasury was better placed to comment on the issue.
“We are at the receiving end. So, this proposal will have to go to Parliament for approval and whatever they agree we will be advised accordingly,” said Kapoloma.
But tax expert Emmanuel Kaluluma has said while this was part of incentives to ministers and MPs, it is a contradiction to what government has been saying, that it intends to widen free privilege has to be revisited.the tax base. He said the duty-
“The duty-free arrangement was introduced as an incentive to MPs who were lowly-paid then and this was some kind of compensation, but I think now they have more incentives. The other challenge is that there are other people equally entitled to duty-free vehicles, why are they left out? And this, since it is in their interest, will easily be approved,” said Kaluluma.
A source working with MRA, who opted for anonymity, said he finds the proposal more out of selfish interest than any genuine reason.
“We are in a campaign mood and everything is political. We need more taxes and here we are removing some of the tax avenues. What is even more worrying is that some MPs abuse the duty-free status; they buy a car, clear it and sell it to someone who would be using it and not them after all they are entitled to more than one during their term,” said the source.
Members of Parliament (MPs) during a five-year term are entitled to procure two vehicles duty-free while ministers who are also MPs have a privilege to buy three vehicles without duty. But when disposing off the vehicles or change of ownership duty had to be paid.
This is likely to be good news to MPs and Ministers and the proposal is likely to receive overwhelming support from MPS when tabled in the house.