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MRA records 102 tax evasion cases in 2015

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The Malawi Revenue Authority has said it handled 102 tax evasion cases in 2015 and that from May to December last year, over K400 million was charged in tax evasion penalties, pointing to how rampant the malpractice is in the country.

Since Value Added Tax (Vat) revenue collection was extended to retailers and wholesalers in November 2002, traders, who have at least K10 million taxable goods, are expected to issue a Malawi Revenue Authority (MRA) sanctioned fiscal receipt for every sale they make.

The fiscal receipt is issued by a machine called Electronic Fiscal Device (EFD) which automatically calculates Vat from every transaction punched into it.

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For a pair shoes and pliers that cost K2,000 each, for example, MRA charged K283.25 as Vat and for a K800 pair of shoes, MRA charged K113.30 (as of January 06, 2015).

The figures look small, but some shops see a constant stream of buyers all day long and by simply not issuing the fiscal receipt, the shrewd traders pocket the Vat.

Ministry of Industry and Trade, through its spokesperson, Wiskes Nkombezi, while acknowledging that the issue is largely an MRA matter, said it is “illegal and punishable” to evade paying tax.

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“When we do our inspections, we do find that these traders do no not display the machine so that they should not issue receipts… we also have observed that they tell consumers that they will pay cheaper prices if they do not get a receipt.

“And these consumers, most of whom from the villages, are forced to buy without getting receipts,” said Nkombedzi.

MRA, through its Deputy Director of Corporate Affairs, Steven Kapoloma, said EFDs were brought in due to under-declarations and tax evasion.

He also said since their introduction, EFDs have improved Vat collection but conceded that there are indeed some “practices of cheating by traders”.

Kapoloma said most non-compliance is encouraged by buyers not demanding fiscal receipts which traders are taking advantage of by not issuing them.

“… according to law, every Vat registered business is supposed to visibly display its Vat Registration Certificate and it is expected of them to issue fiscal receipts for purchases made by consumers. If they are not doing so, then MRA must be promptly notified,” said Kapoloma in an email response.

Apart from not issuing receipts, MRA claims some traders resort to doing business after hours, smuggling goods, cooking-up their finances to evade tax and misclassifying goods as a means of evading tax.

“The practice of tax evasion is detrimental to national development and our appeal to members of the public is that they must always report issues of any malpractices such as smuggling, tax evasion and corruption…,” said Kapoloma.

The Consumers Association of Malawi (Cama) launched an initiative dubbed ‘Receipt Langa’ in December 2014. Though aimed at protecting consumer rights, it was reported to be beneficial to MRA who stood to gain as receipts issuing makes the tax collector’s job easy.

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