Tax system burdens individuals—Experts

Malawi’s tax administration system burdens individuals at the expense of corporates, local tax experts have said. This was disclosed in Blantyre on Thursday during a panel discussion on the sidelines of a taxation book launch.

Commenting on specific industry challenges for taxpayers in Malawi, Vyamala Moyo, who is a senior tax manager at Pricewaterhouse Cooper (PwC), said the shift in burden has come about because of the perceived information disconnect between Malawi Revenue Authority (MRA) and the taxpayer.

“If you go across industries in Malawi, you will find that there are diverse problems because of a disconnect between the agency that collects revenues on part of government and the taxpayer that is expected to comply. If you look at the specifics, you will find industries have challenges in complying to pay taxes,” he said.

“You will find that sometimes those particular industry players go around the compliance tools in order for them to be comfortable.”

Moyo said if one looks at the spectrum of the revenue stream and analyse, “you will find that individual taxes apply more other than other taxes, including pay as you earn (Paye) other than those from businesses,” he said.

Moyo said the situation is like this because in most cases, government does not meet the expectation of the taxpayer mainly because of the information gap that exists.

“The sectors that are supposed to have a greater impact in terms of larger revenue streams are neglected in terms of giving information on compliance and the burden goes back to individuals,” he said.

Weighing in on the same, Misheck Msiska, a partner at audit and tax advisory firm EY, said individuals, especially those on a salary are the ones contributing more to the tax kitty than those in business.

“It seems like individuals, especially those on a salary ,seem to be contributing much more than those doing businesses. This has to do with compliance. On the part of direct taxes, compliance is bad, it is individuals on salary and corporates who are fully visible that are paying taxes.

“Those who are doing businesses are building mansions and submitting returns to MRA, but when we see their expenditure, it is just much. This goes back to the same thing, compliance is a big problem,” he said.

Msiska said “at every opportunity, everybody is going to evade tax, but someone from a salary has nowhere to run to.” In his remarks, Gray Balawe, an official at MRA speaking in his personal capacity, said more needs to be done to uplift the tax profession as it seems the academia is falling short despite of the strides it has made in imparting taxation skills.

In an earlier interview, MRA commissioner for domestic taxes Nellie Jimu said despite the challenges faced in tax administration, Malawi’s value added collection has been growing steadily since the extension from manufactures to wholesalers and retailers in 2005.

Last week, the African Tax Administration Forum (Ataf) called for a balancing act between systemic broadening of the tax base and protecting the public from the tax burden.

Atax executive secretary Logan Wort said in Blantyre that expanding the tax base does not mean increasing the taxes, but rather increasing the number of people paying taxes so that the amount paid per person is reduced as the burden is shared.