The tax provision seeking to collect taxes and penalties from Malawi Revenue Authority’s (MRA) tax audits and investigations has potential to kill businesses, a tax analyst has said.
In an interview, Misheck Msiska said this is because MRA has been known to lack in capacity; hence, the exorbitant taxes and penalties charged as a result of audits are usually challenged on appeal.
He said: “If taxpayers are forced to pay wrong taxes and penalties, this may lead to shut-down of many businesses in Malawi.”
In the 2021/22 Budget Statement, Minister of Finance Felix Mlusu called for the need to amend the Provision Section 105 (5) of the Taxation Act.
He said there is need to remove the ambiguity in which the court has interpreted the tax expenses as meaning that they shall only be paid before an appeal is heard, where the commissioner general has reasonable suspicion that the taxpayer is moving out of the jurisdiction and will forever be at large.
But Msiska, who is the managing director at MM Tax Advisory Services, argued that the notion that wrong taxes paid to MRA are recoverable upon successful appeal is a non-starter.
He said: “MRA usually has little appetite to conclude tax appeals when the concerned taxes have already been collected, and so we might see cases dragging on for years and years.
“Secondly, MRA might be less flexible to address the appeal even where MRA’s determination is wrong, if the concerned taxes have already been paid. “
According to Msiska, MRA has a backlog of refunds, as such, it will be a tall order for it to refund the taxes wrongly collected.
But in his reaction MRA head of corporate affairs Steve Kapoloma said the measure should not be a cause for concern as the provision has been repealed.
He said in an interview on Tuesday: “All administrative measures have been moved to the Tax Administration Bill which once assented to will become an Act. There are no new provisions governing objections and appeals under the Tax Administration Bill.
“Under TAB, for example, taxpayers will be required to pay 50 percent of the disputed amount before an appeal.”
According to Kapoloma, the requirement to pay the taxes when making an objection to the commissioner general has been removed and the 50 percent will only apply when appealing to the tribunal.