Defaulting taxpayers owe the public purse through the Malawi Revenue Authority (MRA) at least K1 trillion in cumulative unremitted taxes over a 10-year period, it has emerged.
Impeccable sources at Msonkho House in Blantyre, the headquarters of MRA, confided in The Nation that the whopping arrears were compiled by the public tax collector’s Debt Management Unit established by new Commissioner General John Biziwick.
“There were conflicting figures regarding how much taxpayers owe MRA and the new management led by the new Commissioner General established a Debt Management Unit to undertake a thorough check of how much taxes people owe MRA and, by extension, the people of Malawi.
“The exercise has been very revealing as figures kept rising up to K200 billion; then half a trillion kwacha until it hit K1 trillion. As of now, it is over K1 trillion,” said one of the sources on the uncollected money that is almost equivalent to a year’s collection at current MRA tax revenue figures.
The source said the culprits include statutory corporations, private sector companies and businesspersons.
When contacted, MRA head of corporate affairs Steve Kapoloma on Monday asked for a written questionnaire to facilitate his internal consultations on the issue. But he indicated he would not be able to provide a response by close of business on Monday because he needed more time.
The estimated K1 trillion in defaulted tax revenue is almost equivalent to the K1.179 trillion in domestic revenue which Treasury projected in the 2020/21 National Budget set to expire on June 30 2021.
The bulk of the domestic revenue or K1.116 trillion is tax revenue with K63.1 billion expected from other fees and services offered by public entities.
Reacting to the defaulted taxes which are equivalent to almost half the national budget of K2.3 trillion, tax analyst Emmanuel Kaluluma said the development demonstrates low levels of compliance among taxpayers.
He also said the situation also unmasks the inefficiencies and corruption in the tax collection drive.
Kaluluma, who has previously worked at MRA to the level of commissioner of domestic taxes, said: “MRA has over time been failing to meet its revenue targets. Perhaps if this [issue of arrears] is addressed promptly, we will not be having revenue deficits. We also see MRA failing to execute its duties well [otherwise] why should it take auditors to show us MRA is failing to collect taxes when they have an audit function?
“MRA has to up its game to ensure culprits are brought to justice because what also gets frustrating is such issues when revealed go eight to nine months without direction.”
Besides pouncing on tax defaulters to enforce payment of arrears, MRA last year introduced a voluntary tax compliance window to give businesses and other taxpayers relief in the wake of the economic impact of the Covid-19 pandemic.
By November 30 2020 when the window closed, MRA had collected K4.6 billion through the initiative. The window opened on April 8 2020 to last six months, but was extended to November 30.
During the window, MRA waived penalties for default to encourage compliance.
In an earlier interview, Kapoloma said 4 000 taxpayers availed themselves to sort out their tax obligations, but the tax collector realised K4.6 billion from 180 applicants.
Tax defaults are common in the country’s economy.
Last week, MRA said businesses in Blantyre and Lilongwe cities led the pack of those ignoring use of electronic fiscal devices (EFD) used to compute and collect value-added tax (VAT).
Through a promotion dubbed Kuyiphula ndi Lisiti Langa that encourages consumers to demand EFD transaction receipts and report those not issuing the same, at least 500 unscrupulous traders were busted.
In March this year, Human Rights Defenders Coalition asked the Anti-Corruption Bureau to investigate a private business entity trading as H Adam Wholesalers Neferius on allegations of tax evasion.
This week, MRA pounced on five senior officials of Mapeto David Whitehead and Sons (DWS) Limited over multiple cases of alleged tax evasion estimated at K10.8 billion. The case is currently in court.