Malawi Building and Civil Engineering Contractors and Allied Trades Association (Mabcata) has protested government’s decision to increase withholding tax in construction contracts from four to 10 percent.
Presenting a petition at Parliament Building in Lilongwe yesterday, Mabcata board vice-chairperson Kondwani Kadango said the increase will affect progress of projects and push contractors out of the industry.
Mabcata further argued that a high withholding tax will negatively affect contractors’ cash flow and investment in projects, as a larger part of their payments will be withheld.
Reads the petition in part: “We do hereby request the Ministry of Finance to consider putting on hold the increase and maintaining the withholding tax at the original four percent.
“We make this request, in full recognition of the mandate of the Ministry of Finance through the Malawi Revenue Authority and pray that our request will be granted.”
In an interview later, Kadango said the association was not consulted on the changes and there is need for government to reverse the decision.
“We were already complaining that the four percent was on the higher side. Government takes time to refund the money and it affects our operations,” he said.
Receiving the petition, Parliamentary Committee on Transport and Public Works chairperson Enock Phale said the committee will scrutinise the petition and make a report to the Speaker of the National Assembly Catherine Gotani Hara.
Minister of Finance and Economic Affairs Sosten Gwengwe declined to comment on the matter, saying Treasury spokesperson was better placed to give the official response for the ministry.
Treasury spokesperson Taurai Banda, on the other hand, said the Ministry of Finance held pre-budget consultations in all regions and all stakeholders were involved.
Meanwhile, taxation analyst Emmanuel Kaluluma said it is not mandatory for government to consult Mabcata on the tax changes.
In an interview yesterday, he also wondered why Mabcata is protesting the changes when government will give back the money when contractors do not make a profit.
“Not many people would like to pay tax. If government consulted everyone on what they should be paying, people would say zero percent,” said Kaluluma.
In this year’s budget, government increased the withholding tax rate for contractors and sub-contractors in the building and construction industries.