The Malawi Revenue Authority (MRA) has written Malawi Savings Bank (MSB) to return around K300 million (about $1.2 million) in unapproved commissions, sources at the tax collector have confided.
In 2010, MRA asked four commercial banksâ€”MSB, National Bank of Malawi (NBM), Standard Bank and NBS Bankâ€”to be collecting certain taxes on its behalf.
By providing this service, the banks would benefit from financial charges and a float that allows them to invest the money in areas such as inter-bank lending and other revenue lines before remitting it to the authority.
But according to documents in our possession, while NBS Bank, NBM and Standard Bank accepted these terms and signed the deal, MSB held out because it wanted the contractual agreement to include a clause enabling it to get a 0.05 percent commission on its monthly collections apart from the float that the other banks had accepted.
â€œThe bankâ€™s main reason for it to be getting commission on this service is that they have expended much in the refurbishing of the banking halls; hence, the need to recover the expenses and other operating costs,â€ according to an internal MRA report on the initiative that we have seen.
But the source said the very fact that MSB did not have the necessary structures to carry out the exercise should have automatically disqualified them, but that was wavered since they are 100 percent owned by the Government of Malawi, a privilege that may also have allowed them to handle what the MRA internal report calls â€œthe biggest share of the MRA revenue collections.â€
Since MSB demanded the commission, several negotiations have been held to reach an agreement where the bank should benefit from float retention not the commission, but no deal could be reached.
â€œHowever, before an agreement could be reached on the same, the bank [MSB] went ahead to deduct commission from the collected amounts before remitting the amounts to the revenue account at the Reserve Bank at a rate of 0.2 percent, [which is] affecting the revenue figures from June 2010,â€ reads the report.
According figures from MRA we have seen, by the end of June 2012, MSB had retained K282 598 080. 53 in commissions it started collecting in September 2010 before a contract was signed as MRA still had reservations. Sources say if commissions on collections for the month of July 2012 are included, the figure could be well over K300 million.
The negotiations, reads the report, were concluded in June 2010, but no contract was ever signed with MSB.
The bank maintained its stance to still charge commission though at a reduced rate of 0.05 percent on condition that if 60 percent of the collection was invested by the bank during that period concerned, then the commission would not be considered.
The MRA report says following the final discussion, the standard contract (which other banks signed) was amended to suite the MSB negotiations by inserting a clause as below:
.The Bank shall retain 0.05 percent of the monthly collection as commission for providing the services herein.
.The fees referred to above shall be retained on the condition that if the bank shall invest more than 60 percent of the collection, the commission shall fall away.
.The Parties hereby agree that no interest shall accrue to the authority on any amounts held in the revenue accounts.
Despite this preliminary position, MRA did not sign this contract as it feared challenges because, according to the report, MSB usually does not transfer funds to the revenue account on the agreed date.
MRA was also concerned that the commission currently being retained at source reduces the revenue figures deposited in the governmentâ€™s revenue account.
The report says MRA also feared that if the MSB contract is effected, other banks would demand the same conditions, which would eat into government revenue.
MRA also feared the authority has no mechanism to monitor if the bank has invested the funds to the agreed volume of 60 percent or not as a result the bank may end up benefiting twice from the investments and the 0.05 percent commission.
MRA spokesperson Steve Kapoloma confirmed in an interview this week that government instructed that the collection of revenue be done by banks, and the mentioned banks are the ones government chose.
He said negotiations were not concluded and it was going to be difficult for him to comment on an individual bank. He said MRA was still working with the banks.
MSB spokesperson Dora Banda said banking ethics preclude them from discussing their customer/client dealings in the media, and as such, the bank was not able to disclose any information on