MRA seeks to drag 1.3m SMEs into tax net

Malawi Revenue Authority (MRA) says it expects to bring 1.3 million small and medium enterprises (SMEs) into the tax net through its newly launched Block Management System.

Speaking in Blantyre yesterday during the launch of the initiative touted to broaden the tax base, MRA board chairperson Vizenge Kumwenda said as of December 2020, only two percent or 28 000 of SMEs out of 1.6 million were registered for tax.

He said: “Informal sector remains largely untaxed. This system will help broaden the tax base to meet our domestic revenue targets. We would like to take control of our destiny by mobilising domestic resources.

“I urge SMEs to adopt the Block Management System and meet their tax obligations.”

Kumwenda urged MRA to expedite the processing of taxpayers’ charter to enable taxpayers to know what is expected of them and their obligations.

He, however, could not quantify the value of money to be generated from the initiative.

MRA commissioner general John Biziwick said while the initiative will help to reduce cost of compliance on the part of taxpayers, it will also help boost domestic revenue mobilisation.

He said despite the Covid-19 pandemic, businesses have continued to operate and adapt to the changing business environment.

Biziwick said MRA is positive of beating its revenue target, observing that thus far,, domestic revenue collected is 20 percent above what was collected last year during the same period.

Block Management System is a taxpayer outreach scheme, which physically identifies and maps taxpayers and breaks them down into manageable blocks to allow MRA to visit them in person to educate and encourage tax compliance.

It is not a new tax measure, but a concept intended to enable taxpayers to access tax services easily than before.

The Malawi Government adopted the system to level the playing field so that every business person pays their fair share of taxes due to government, increase taxpayers’ understanding of their tax rights and obligations and bring closer to the taxpayer services such as tax registration, payment of taxes and tax education, among others.

MRA will implement the system in Blantyre City on a pilot basis in the 2021/22 financial year. After the pilot phase, the Block Management System will be rolled out in Lilongwe City before extending to other cities in the country.

The tax collection agency has demarcated Blantyre and Limbe into blocks that have already been mapped by distinctive boundaries such as street names and further subdivided into dinstinctive blocks managed by MRA satellite.

A recent FinScope SMEs Survey on the size, scope and characteristics of SMEs sector in Malawi showed that of Malawi’s 1.6 million SMEs in 2019, the sector generated approximately K11.7 billion in revenue.

The 2021/22 National Budget, framed at the height of subdued economic activity due to the impact of the Covid-19 pandemic, projects a budget deficit of K718.3 billion, or seven percent of the gross domestic product during the initial budget design framework.

Ministry of Finance closed the first quarter of the 2021/22 fiscal year with a deficit of K125.9 billion compared to a deficit of K56.89 billion recorded in the last quarter of the previous financial year.

During a similar quarter of the 2020/21 fiscal year, government operations resulted in a narrower deficit of K61.97 billion.

Block Management System is also being implemented in neighbouring countries such as Zambia, Tanzania and Uganda, Rwanda and Ethiopia.