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Industry unhappy with tax penalties

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The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says while government has proposed penalties for late payment of taxes, Capital Hill should be punished as well for delayed tax refunds.

Presenting the K1.29 trillion 2017/18 national budget in Parliament on Friday Finance Minister Goodall Gondwe said that as one way of reducing non-compliance with respect to payment of taxes promoted by varying interest rates on overdue taxes, Capital Hill will introduce a single formula for interest on overdue taxes.

He said the proposed change will standardise interest rates on overdue taxes across all tax types and reduce tax administration costs and workload on the Malawi Revenue Authority (MRA).

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Reacting to the development, MCCCI Chief Executive Officer, Chancellor Kaferapanjira, said the harmonisation of interest charged on overdue taxes and penalties on late submission of returns and late payment of taxes cannot be disputed.

“However what the minister failed to appreciate is why businesses find themselves in such situations.

Certainly no business would want to incur expenses which can avoid.

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“Interest on overdue taxes is incurred because businesses find themselves under a lot of financial stress and not necessarily because they want to benefit from paying a lower interest or lesser penalties,” Kaferapanjira said.

He noted that the tougher the economic environment, the more businesses fall behind in meeting their tax obligations on time.

Kaferapanjira said if the MRA has observed a surge in the number of late submissions or payment, it is because of the state of the economy, and government ought to be concerned with how to put the economy back on track rather than rejoice in collecting more from the already troubled businesses.

“Besides, government has only considered one side, its own side. It has not provided for penalties against itself if it delays refunding taxes such as Value Added Tax (VAT). It is no secret that a lot of businesses are in distress because of government actions such as arrears and delayed VAT refunds.

“Businesses should therefore also be entitled to interest on arrears and late VAT refunds. Absence of interest charge on government also acts as an incentive for it (government) to keep defaulting on settling these arrears and refunds in time. Equally the rate of interest should be similar,” Kaferapanjira said.

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