Icam wants Treasury to review some taxes

Institute of Chartered Accountants in Malawi (Icam) has proposed a comprehensive tax review by, among others, removing or zero rating some taxes.

However, tax experts have differed in opinion. While others have cautioned on revising the taxes downward, saying it will affect revenue collection and stifle government budgetary operations, others have spoke in support.

In its 2020/21 pre-budget consultation written submission to the Ministry of Finance Icam chief executive officer Francis Chinjoka Gondwe said revising taxes downwards will ensure that the cost of doing business is lowered and also provide relief to citizens who are financially stressed due to the Covid-19 pandemic.

Icam proposes a reduction in value added tax (VAT) from current 16.5 percent to 15 percent.

Icam has also proposed non-removal of VAT on water, but to only zero-rate with respect to service the purpose of low cost production because the utility bodies will claim input VAT while at the same time providing water at lower price.

Icam also wants renegotiation of double taxation treaties which were signed around 1970s with partner countries to do away with mismatches.

“We propose that either the band for individual tax rate of 35 percent be taken off from those earning above K3 million or the corporate tax rate should be adjusted upwards accordingly,” reads the submission.

In terms of how to make up for the losses from tax slashes, Icam has proposed widening the tax base to include the informal sector.

This, according to Icam, should include the netting of all rental income earners into tax base by registering all properties, including small businesses who should be paying fixed monthly taxes determined by the government, among others.

Ministry of Finance spokesperson Williams Banda said on Tuesday that Treasury is analysing and consolidating the proposals; hence, they cannot comment.

Tax expert Emmanuel Kaluluma said without statistics, no one can tell how much revenue will be lost.

He said Icam’s proposed measures will give rise to voluntary compliance and that more taxpayers will discharge their tax liability.

Another tax expert, Misheck Msiska, advised against the route of VAT reduction at this time.

He said the decline in business activity has direct impact on income tax and import duty collections.