- Money has accumulated for three years—MCCCI
Despite beating its half-year tax revenue target by 7.7 percent, Treasury is failing to pay the private sector in excess of K16 billion in value added tax (VAT) refunds, it has been established.
This is on top of over K100 billion arrears it owes the private sector for goods and services it provided dating back to 2014.
Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira said in an interview on Tuesday, the input VAT refunds have accumulated for the past three years.
Input VAT is added to the price when one purchases goods or services liable to VAT.
A tax expert has since blamed Malawi Revenue Authority (MRA) for failing to honour the refunds.
Kaferapanjira said the money owed is affecting the operations of the private sector as it is part of its working capital; hence, resorting to borrowing from commercial banks at prohibitive interest rates.
Besides input VAT refunds, Kaferapanjira said there are also other non-tax arrears that government owes the private sector, which are making it difficult for businesses to thrive.
Government is settling billions of arrears dating back to 2014 in dribs and drabs through promissory notes, a development that is not pleasing to the businesses.
MRA director of corporate affairs Steven Kapoloma and Treasury spokesperson Alfred Kutengule were not available for comment yesterday as we went to press.
However, an official from MRA, who spoke on condition of anonymity because he is not authorised to speak on tax matters, confirmed that the tax bull has unsettled VAT refunds dating back to three years.
He blamed a lack of proper documentation by the companies, which has affected the refund process.
But tax expert Emmanuel Kaluluma blamed government for not releasing funding for the refunds.
“In fact, it is not only VAT refunds, but the case is the same with income tax. I have clients who are also pushing MRA for VAT refunds dating back to as far as two years.
“While the law gives the commissioner general powers to make the refund immediately as it does not generate interests, many businesses are yet to get their VAT and income refund,” he said.
On the arrears government is settling through promissory notes, Kaferapanjira said this will result in increasing interest payments in the next three years.
“The Minister of Finance, Economic Planning and Development [Goodall Gondwe] rightly points out that the arrears of K155 billion identified in 2014 have been largely settled by zero coupon promissory notes.
“This means that the real sector owed such arrears is not making any interest at all, yet this is a genuine cost to government. When such zero coupon promissory notes are discounted at commercial banks, the bearers are getting a third of their face values,” he said.
Effectively, this means two thirds of the private sector’s money is translating into savings for government, which Kaferapanjira said is “cruel on part of the government”.
“Roughly two thirds of K155 billion is K103.85 billion. This is how much government has taken out of the private sector.