The Society of Accountants in Malawi (Socam) has suggested to government to consider introducing a 12-month tax penalties amnesty to enable businesses to declare to pay the taxes due and not be charged penalties.
Socam taxation committee chairperson Andrew Chiwoko, in a presentation at a 2013/14 pre-budget consultation meeting in Blantyre on Monday, said the move will help the Malawi Revenue Authority (MRA) to collect revenue and maintain details of taxpayers, which can be used as a reference point in future.
“Socam has observed that there are a number of businesses that are not paying tax at the moment because they are not willing to pay the huge penalties that will be charged on them by MRA.
“However, most companies would come forward to self -declare and pay the stated taxes if MRA had given them a period in which a self-declared taxpayer would not be charged any penalties, but would only be required to pay the tax in arrears,” he said.
Finance Minister Ken Lipenga and Treasury officials are seeking input from a crosssection of individuals, the private sector and development partners to incorporate their views in the forthcoming budget.
The accountancy professional body has over the years raised a number of taxation issues to government to help it improve the business climate in Malawi for the private sector, touted as the engine of economic growth, to grow. The presentation raised a number of proposals.
Chiwoko said Socam is worried that some businesses are allowed to claim capital allowances on all passengers carrying motor vehicles which include luxurious passenger vehicles that are not used in the production of income in the business.
He said most of the vehicles are expensive and have large engine capacities and, hence, consumption of fuel is high, resulting in increased foreign exchange consumption.
“Socam recommends that capital allowances should be claimed in full on all motor vehicles up to an engine capacity of 2 000 cc. The 50 percent capital allowances should be claimed on passenger motor vehicles with an engine capacity above 2 000cc.
“This will discourage purchase of luxurious vehicles by organisations, thereby saving foreign currency used to purchase such vehicles and the extra fuel consumed by cars with big engine capacities,” explained Chiwoko.
Effectively, this means that those that choose to purchase such vehicles will pay more tax since these will not be an allowable deduction.
Socam has described the introduction of an additional three percent corporate tax for telecommunication companies in the 2012/13 budget as discriminatory and the potential to cause serious inequalities in the tax system.
The concern is that government has not made it public the reasons a particular industry has been subjected to a 33 percent corporate tax while the corporate tax for the rest of the industries has been maintained at 30 percent.
Socam has suggested to government to come up with taxpayers’ Bill of Rights and to also make transparent tax concessions.
In response, Lipenga commended Socam for coming up with the proposals saying government always values their input.
“We think their proposals are pertinent,” he said.