MRA caught flat-footed on VAT

The hullaballoo about VAT on non-banking services is most unfortunate. But perhaps it is not very surprising for the fumbling nation that we are. We are always foozling even on simple issues, not knowing exactly what we want to do and how to do it.

Let us take the 16.5 percent VAT on non-banking services, for example. How come the banking and tax experts—the Bankers Association of Malawi (BAM), commercial banks and the Malawi Revenue Authority (MRA), respectively—got it all wrong?

Why this furore from a single clause in the Vat (Amendment) Act 2021? Who was supposed to be more knowledgeable about the VAT if not MRA who, I presume, originated the amendment?

I am asking all these questions because we, the laymen from Kamchocho in Mzimba, Kaphatenga in Salima and Sorjini in Nsanje, are being fed with confusing and misleading information from none other than the top-notch gurus in their professions.

BAM, MRA and the Minister of Finance are all saying different things. In the ensuing ruckus, BAM which thought it was doing a good activism job of educating its clientele about the VAT has turned out to be the rubble rouser. The professional body issued a statement announcing the introduction of VAT on some non-banking services following the amendment of the VAT (Amendment) Act 2021. Unfortunately, the announcement was too mean to be meaningful making people wonder why the body issued the statement in the first place. No wonder the announcement ruffled some feathers in the MRA corridors prompting the tax collector to trash the statement as a pack of misinformation. 

MRA, through its deputy commissioner-general Henry Ngutwa, tried to demystify the puzzle that is VAT on non-banking services. He volunteered a long list of what in banking parlance are non-banking services and attract VAT.

But just when Ngutwa thought he had acquitted his organisation well on the matter, Minister of Finance Felix Mlusu stormed the scene to deliver what might have been a hammer-blow statement to banks about who would be dipping deeper in their pockets for this VAT. Ordinarily, VAT is paid by the end user, but Mlusu took time to make it crystal clear that banks already collect this money and so their customers are not supposed to pay again.

The minister’s punch lines: “Banks were not paying VAT [they were collecting] on the earnings on these services but now they have to. If customers discover they are being charged the 16.5 percent VAT on the services, they should report to the Reserve Bank of Malawi [RBM], which is the regulator for all banks for appropriate action.”

Thank you very much Hon Minister for this important clarification.

But here is my question to the Minister, MRA, BAM and RBM. Why all this confusion on the 16.5 percent VAT on non-banking services in the first place?

The last time I checked, long before tabling the VAT (Amendment) Bill 2021, all stakeholders on the VAT issues were supposed to be on the same page so that there is no doubt in anybody’s mind about who should do what, how, when and where regarding the new tax.

From the confusion we have seen so far, consultations meant to make all stakeholders speak the same language on VAT did not take place. Or, if they did, someone did a very bad job about them. Sorry. But some things just have to be said the way they are. A spade should be called by its real name, and not a big spoon.

This pandemonium is because someone has been sleeping on the job, resulting in BAM saying one thing, MRA another; commercial banks doing what they know best, then the Minister of Finance rubbishing everything, and saying banks should not charge customers any more money than what they already have been collecting. >From the same money they collect they must be deducting 16.5 percent VAT and give to Caesar.

Oh Gosh! Between Ministry of Finance, RBM and MRA, someone is responsible for this mess. While the buck stops at the ministry, it is MRA as the implementing agency that must take the guilty plea. And let’s hope RBM—as the regulator of all banks which has not yet spoken so far—will not come with a different statement.

While we are on it, with all this hurly-burly on VAT on non-banking services, RBM should take a sober look at all banks charges. Banks have been posting exceedingly obscene after-tax profits even in the most bizarre of situations like the Covid-19 era. Just so we are all sure the banks are not scheming and skinning us out of confusion in the way they started doing so on VAT on non-banking services.