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Expert cautions government on revenue targets

Tom Malata

KALULUMA—Tax collection responds to business environment

A taxation expert, Emmanuel Kaluluma, has advised the government to empower local businesses if the Malawi Revenue Authority (MRA) is to collect meaningful revenue in the wake of Covid-19.

Speaking in an interview Monday, Kaluluma, a managing partner at EK Tax Consultants, said the country is already in a mess when it comes to tax collection because local businesses are not empowered.

“What is affecting tax collection is completely outside MRA because tax collection responds to the business environment; if the environment is good, tax collection booms and the vice versa. So for Malawi, the business environment already suffers from political uncertainty and the virus has just added,” Kaluluma said.

This comes as MRA admitted last week that it is facing challenges in meeting revenue targets due to the Covid-19 spread.

MRA Commissioner General Tom Malata said greater part of the first quarter of 2020 was fairly good until effects of the pandemic started to been seen.

“The first quarter has been fairly good but we are noticing a challenge with the coming in of the Coronavirus because as you are aware taxes are collected on imports and you have heard countries are going on lockdown making us loose on duty,” Malata explained.

In January this year, MRA registered a decrease in revenue collection of 18.3 percent to K110.4 billion compared to an increase of 61.2 percent to K135.2 billion recorded in the previous month.

Domestic revenue declined by 10.5 percent to K104.6 billion and this was a result of decreases in tax revenue and non-tax revenue by 7.9 percent to K101.7 billion and 54.6 percent to K2.9 billion, respectively according to treasury.

This decrease is feared to have continued in February and March as Malawi business partners and neighboring countries registered Covid-19 cases and implemented lockdowns.

MRA fears this subdued revenue collection may worsen as the pandemic continues to throw economies into a tight corner.

“Most of the products are imports; even the materials for the manufacturers in the country are imports so there will be an impact on duty.

“Further, the fact that there is a challenge on imports of materials means production will be affected and the sales will be affected then Value Added Tax and Corporate Tax dwindling,” Malata lamented.

Announcing the Mid-Year Budget review in February this year, the Minister of Finance Joseph Mwanamvekha projected a K926.9 billion revenue collection with K802.9 billion being domestic while K124 billion grants.

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