Be fair to industry – Expert urges MRA

One of the country’s tax experts says the Malawi Revenue Authority (MRA), should exhaust all available options before resorting to closing struggling tax defaulting entities.

The expert, Henry Ngutwa, who is Managing Partner of Odeide Tax Lawyers, was responding to a questionnaire from Times Group on the recent conduct of the tax collector which has in recent times sealed a number of firms over tax issues.

Ngutwa said the law has an inbuilt mechanism where struggling taxpayers, could be allowed to settle the tax liability by instalments.

He added that the Commissioner General also has the powers to waive penalties though he or she does not have powers to waive assessed taxes.

“I would not say distraint action is the best option for MRA; it is but one of the options they have to enforce payment of taxes by delinquent taxpayers. Other options are garnishee orders, appointment of representative taxpayers, taking out court proceedings for the recovery of a tax debt or filing for insolvency or bankruptcy.

“All these enforcement measures are coercive in nature and are usually at the tail end of a long assessment process. They are usually invoked as a last resort and are meant to compel the tax payer to make necessary arrangements to settle his/her tax liability,” Ngutwa said.

He was, however, quick to point out that under the law, the tax authority has quite expansive enforcement powers and, as long as it is demonstrated that they have acted within the law, it is very difficult to fault their actions.

In the past two years, companies such as Times Group, Mike Appel and Gatto have fallen victim to MRA’s unfair tax administration practices.

Former Malawi Confederation of Chambers of Commerce and Industry (MCCCI) President, Newton Kambala, said last year that the local economy is already facing a lot of challenges, adding that the last thing Malawians would like to see is the folding of another company.

“We believe these issues could be resolved through contact and dialogue. The two parties need to come to a round table to see how best they could settle the matter.

“We are not encouraging people not to pay tax, but we want the tax issues to be resolved for the good of the economy,” said Kambala during a press briefing organised by Mike Appel and Gatto.

MRA Head of Corporate Affairs could not be reached for comment.

In a ruling for an injunction which Times Group obtained against MRA on January 14, 2014, High Court Judge Dunstan Mwaungulu, underscored the need to strike a balance between the public interest in collecting taxes promptly and the right of the claimant to continue in business.

“They are a media group that serves the public interest, feeding curious minds of citizens. It must be in the public interest to have them around. Whatever public interest is served by collection of taxes and promptly there is a competing public interest served by a media group of the pedigree and calibre of Blantyre Printing and Publishing.

“Consequently, the balance is only achieved by considerations that the claimant has abided by all reasonable arrangements, some pressing, to generate sufficient revenues to reduce tax arrears and pay current tax obligations,” Mwaungulu said in the ruling.

The ruling urged MRA to examine the commercial and business sense of doing things and dutifully tailor the plethora of methods of collecting taxes in the Taxation Act that achieves optimum commercial and business outcomes and reduces risks of evicting of a commercial business enterprise.