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Malawi To Tackle Tax Compliance In 2014/15

by Lorys Charalambous,, Cyprus

08 September 2014

Malawi's 2014/2015 Budget Statement, delivered by Malawi's Minister of Finance Goodall E. Gondwe on September 2, 2014, aims to achieve 21 percent revenue growth, supported by efforts to increase tax compliance.

Although 2014/15 tax revenues are assumed to grow by 21.1 percent year-on-year, Gondwe said that this revenue growth rate is "conservative when compared with growth rates of more than 35 percent in domestic revenues for the previous two years." This is owing to a projected fall in inflation to 15.6 percent, from 27.3 percent last year.

Total revenue and grants are estimated at MWK635.6bn (USD1.6bn), comprising MWK525.3bn in domestic revenues and MWK110.3bn in foreign grants. This year's overall fiscal deficit (total revenue and grants less expenditure) is expected to be MWK107.1bn. Donor support will cover only 14.7 percent of the total, largely due to the difficulties the country is experiencing in finalizing such aid following last year's so-called "cashgate" financial scandal.

Gondwe said: "The Government will continue with efforts to improve revenue administration and collection, and it is envisaged that actual collection will be far higher than projected in the budget."

This will include the introduction of an Integrated Tax Administration system to replace the current manual system, and an increased MWK200,000 penalty for registered domestic taxpayers who fail to renew their excise license with the Malawi Revenue Authority (MRA). In addition, the Government is to open an account at the Reserve Bank of Malawi, from which monies will be readily available for use by MRA to provide tax refunds. This policy is aimed at improving value-added tax compliance and ensuring the timely processing of claims by the tax authority.

"Some Malawians and locally hired employees working in foreign embassies and international organizations are not paying taxes as required," Gondwe said, adding that the Government "has noted with concern that some holders of permanent residence permits are also not paying tax on income earned in Malawi." There are to be joint ministerial investigations of both of these matters during the fiscal year, he said.

With regard to international tax compliance, the Government has amended the Customs and Excise Act on the evaluation of exporters' selling prices, so as to use international reference prices as the basis for a determination of their credibility. Finally, to improve the nation's international tax rules and encourage foreign direct investment, the Government will continue to engage with other jurisdictions in the negotiation of new double taxation agreements, and will continue its review of existing agreements and "especially those that negatively impact on [Malawi's] tax base through the loss of taxing rights."

TAGS: individuals | compliance | tax | economics | business | double tax agreement (DTA) | value added tax (VAT) | tax compliance | law | employees | budget | Malawi | excise duty | tax authority | agreements | transfer pricing | tax breaks | revenue statistics | inflation | VAT refunds | VAT compliance matters | Tax

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