The Malawi Revenue Authority (MRA) in December failed to meet its targets in income and profits tax, value added and excise duties and barely met its overall target.
The December tax outrun indicates that MRA collected K7.86 billion in income and profits which includes pay as you earn (Paye), fringe benefits, nonresident tax and corporate tax, thereby missing its target of about K8.1 billion by K238 million.
MRA missed its target on corporate tax by about half a billion kwacha, and fringe benefits and nonresident tax by K119 million, but managed to beat its targets on Paye by about K364 million.
The tax collector also struggled to meet its target on value added tax (VAT) and excise duties, collecting K8.79 billion, K394 million below its projection.
In an e-mailed response on Thursday, MRA public relations and communications manager Steve Kapoloma declined to specifically comment on the December performance on the six months period. He blamed the failure on tax evasion among others.
“The underperformance in corporate tax can be attributed to existence of tax evasion or avoidance schemes such as the price transfer schemes, incentives schemes and international treaties.
“On domestic VAT, the underperformance can be attributed to reduced consumption of taxable goods as a result of loss of purchasing power. There is also existence of tax evasion schemes in VAT such as suppression of sales and non-issuance of tax invoices,” said Kapoloma.
He added that the underperformance in excise duties was due to reduction of the excise duty rates and removal of some products from the excise duty regime as provided in the current budget.
Cumulatively, since July to December, MRA has collected a total of K124.58 billion, K534million above its revised projection.
Specifically, in the six months period MRA managed to collect K28 billion in Paye, K13 billion in corporate tax, K54 billion in VAT and excise duties, K15 billion in import and prepayment taxes and K1.7 billion in dividend tax.
In the period, cumulatively MRA missed targets on corporate tax by K637 million, VAT and excise duties by K957 million. However, it managed to beat targets on import duty and prepayment by K662 million, and Paye by K736 million.
In an interview on Wednesday a financial expert, James Nyirenda, noted that the failure to meet the target in corporate tax is an indication that companies are struggling.
“This is an indication that companies are struggling due to high costs and are, therefore, providing for low profits.
“I appreciate, we have a narrow tax base, but MRA must look at options of expanding it. It might look at asset based assessment on paying tax where tax liability is based on what one owns and not income earned, or alternatively use a combination of the two. There are a lot of people,” he said.
Despite the struggle in December, MRA managed to beat its target of K19.8 billion by collecting a total of K20.11 billion. This is slightly above the K19billion November revenue and way below its K25 billion October collection.