Treasury has vowed to continue with efforts to broaden the tax base and improve efficiency and effectiveness in revenue administration systems in the short to medium-term.
In its 2019 Economic and Fiscal Policy Statement (Efps), which is part of budget documents, Treasury plans to widen the tax net and broaden the base by, among others, exploring new areas to tax, increase enforcement and monitoring compliance.
According to the Efps, government will continue to review tax legislation as well as renegotiating some obsolete double taxation avoidance agreements (DTAAs).
Reads the statement: “Government will continue to review tax legislation, including the establishment of a Revenue Appeals Tribunal for efficient resolution of tax disputes. Government also intends to curb tax avoidance by reviewing and renegotiating some obsolete double taxation avoidance agreements, negotiating new DTAAs with potential treaty partners and adopting measures to prevent base erosion and profit shifting [Beps].”
During the 2019/20 pre-budget consultations, the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) said businesses were not expecting Treasury to increase or introduce new taxes in the 2019/20 National Budget, arguing that existing industries cannot absorb extra burden.
However, this financial year, Treasury increased its domestic revenue projection to K1.4 trillion, with K1.3 trillion to be generated from taxes.
During the previous financial year, total domestic revenue amounted to K1 trillion against the revised estimate of K1.03 trillion, with taxes totalling K968.9 billion against the mid-year target of K978.7 billion, underperforming by K9.7 billion.
In 2017/18 financial year, domestic revenue amounted to K918.2 billion against an end-year revised target of K925.6 billion, with taxes amounting to K861.9 billion against an end-year revised target of K870.9 billion, reflecting an under performance of K8.9 billion.
MCCCI chief executive officer Chancellor Kaferapanjira said in an interview on Tuesday that the 22 percent projected jump in domestic revenue from the last financial year is out of tune with reality.
He said the estimates are not in tune with the struggles companies are going through and will end up burdening citizens and corporates through accumulation of arrears and increased tax rates.
Kaferapanjira said the increase is “over-ambitious, especially because the economic environment has continually become hostile”.
Institute of Chartered Accountants in Malawi (Icam) chief executive officer Francis Chinjoka Gondwe, on Tuesday said to improve domestic revenue mobilisation, there is need to bring into the tax net government agencies that make surpluses such as Malawi Energy Regulatory Authority and the Malawi Communications Regulatory Authority.
He said government can also widen the tax base by identifying more taxpayers and re-introducing a taxpayer identification survey programme as well as the tax amnestyof 12 months, which is provided for in the law to allow more taxpayers to come forth.