Malawi Revenue Authority (MRA) has intensified its drive to widen the tax base with the imposition of 30 percent tax on churches and faith-based organisations operating business ventures effective October.
However, the development has opened a can of worms with some members of the clergy strongly questioning the motive behind the move, arguing that the tax bull is bent on milking religious institutions.
The move has come at a time MRA has not met its projected collections for the first two months of the 2017/18 fiscal year and it is part of its broader initiative to widen the tax base.
But MRA head of corporate affairs Steve Kapoloma said the new tax is not applicable to offerings and tithes.
The new tax structure comprises income tax, pay as you earn (Paye), withholding tax, value added tax (VAT) and the Tevet levy introduced in 2015.
At a meeting with members of the clergy in Blantyre on Tuesday, Kapoloma said the tax will apply on businesses which religious institutions run directly or indirectly to boost their revenue collection.
Among the religious institutions to be subjected to the tax include those running private schools, hospitals and clinics as well as other property which churches normally hire out for profits.
Kapoloma told the clergy to embrace this tax measure, stating that it is aimed at improving the country’s socio-economic development.
He said religious bodies qualify to pay tax because a number of them make payments to various suppliers and service providers.
Said Kapoloma: “The Taxation Act requires taxes to be charged on, levied on and paid by every ecclesiastical body at the rate of 30 percent as specified in the eleventh schedule to the Taxation Act.”
But reacting to the new tax obligation, Pastor Jeston Chiweza, general secretary of the Living Waters International Church, said they do not understand the whole idea behind the new tax which is supposed to be principle-based, not law-based as they currently sound.
“There is a continuous revolution in the world that has not spared all sectors of the church, including entertainment, transport, education and health; hence, they should rethink on what is tax free because that has potential to defeat our ecclesiastical role as religious bodies,” he said.
Muslim Association of Malawi (MAM) secretary general Twaibu Lawe also expressed disapproval with the new tax measure, arguing that some mosques are already feeling the effects of ecclesiastical levy. n