Tax expert blames Malawi revenue under-collection on treaties

A tax consultant has attributed recent low levels of government revenue from trade to international treaties that Malawi has signed and is party to.

Emanuel Kaluluma, who is a senior consultant at a Blantyre-based EK Tax Consultants, said yesterday it is high time Malawians appreciated that trade groupings that Malawi has joined come with a cost.

Kaluluma was reacting to a recent trend where the country’s tax collecting body, the Malawi Revenue Authority (MRA), has seen itself under collecting revenue by missing its projections.

Malawi has over the years progressively phased down her tariffs with the Southern Africa Development Community (Sadc) and the Common Market for Eastern  and Southern Africa (Comesa).

For instance, under the Sadc Trade Protocol, the tariff phase down is aimed at creating a Free Trade Area (FTA) which was achieved in 2008 and it envisages the establishment of a Customs Union.

In the month of March, 2015, MRA collected K34.34 billion, which was three percent less than the earlier projection due to underperformance of some key taxes.

And gross tax revenues collected during the financial year 2014/15 to the month of February, 2015, amounted to K309.9 billion, representing a 1.89 percent under-collection.

Reacting to the trend, Kaluluma, who once headed the Large Taxpayer Office at MRA, said Malawians should accept that time has come for the country to come to terms with the fact that Customs “is not a tax for tomorrow.”

“What we are seeing is expected and let us not take a position that Malawi Revenue Authority through its Customs and Excise Division is failing,” he said in a write-up made available to Business News.

He said globally, even in industrialised countries, import duties are not a major contributor to their revenues.

Treasury spokesperson Nations Msowoya yesterday welcomed Kaluluma’s suggestions, but said from their analytical point of view, the recent low levels of revenue from trade taxes are due to the suppressed domestic demand for goods and also slow down in the economy.

“I don’t think the treaties that we have signed as a country could account for the loss in tax revenue,” said Msowoya.