Suspend transfer pricing, MRA told
Malawi Government has been asked to suspended transfer pricing assessments being implemented by the Malawi Revenue Authority (MRA) until due process has been followed and adequate expertise developed in the tax collecting body.
Transfer pricing is one of the most important issues in international tax and it happens whenever two related companies, for example, a parent company and a subsidiary trade with each other.
According to tax experts, transfer pricing is not illegal or abusive, but what is illegal or abusive is transfer mispricing, also known as transfer pricing manipulation or abusive transfer pricing.
In a write-up, the Society of Accountants in Malawi (Socam) taxation committee chairperson Andrew Chioko noted that MRA is now “aggressively making assessments of tax liability based on the recently developed transfer pricing rules.
“MRA is using a consultant to make the assessments and demanding billions of kwachas from companies in some cases. Socam believes that MRA has rushed to implement transfer pricing assessments because MRA has not yet developed expertise in the area,” explained Chioko.
He doubted if at all appeals on transfer pricing assessments are being handled competently without referring to the same consultant in which case tax payers will not obtain justice.
Socam thinks that MRA did not consult widely, and did not undertake due process in the development of the transfer pricing rules.
MRA deputy director of corporate affairs Steve Kapoloma could not be reached yesterday for comment.
Transfer pricing mainly affects multinationals and, because of this, most of them feel harassed, a situation that has compelled them to put on hold their investment plans until the issue is clarified.
This issue has been ongoing for some time and there is a feeling that it is impacting heavily on business confidence, regarding the fairness of the country’s tax regime.
Another issue of concern, according to Socam, has also been on double taxation.
It has been found out that most double taxation agreements that are currently in force between Malawi and other countries are out of date.
“This has resulted in MRA rejecting certain transactions that should in fact be allowable by the agreements in their current state,” said Chioko.
The professional tax body has also recommended a review all the agreements and update them as necessary as this could be a potential area for government to realise additional tax revenues.
