A look at new tax measures in the 2018/19 budget
The Minister of Finance, Economic Planning and Development, Honourable Goodall Gondwe said K1.05 trillion in domestic revenue is expected to fund the K1.5 trillion 2018/2019 national budget.
The Minister told the nation in Parliament during the budget presentation on Friday, May 18. He said the expected domestic revenue for the fiscal year represents 19.7 percent of GDP and announced new tax measures.
Honourable Gondwe laid out revenue administration and policy reforms that will see the establishment of a Tax Revenue Appeals Tribunal through a bill.
New Customs and Excise tax measures became effective mid-night the same day and the minister said Value Added Tax (VAT) and Income Tax measures will be effective from July 1 when the relevant bills are passed by Parliament.
“With immediate effect customs duties on cesspool and water bowsers have been removed and only VAT will be applicable. Government believes that this measure will lower the costs and encourage infrastructure development, especially roads, through reduced importation costs of the capital equipment,” he said.
As a way of ensuring that only legitimate projects benefit from the tax privileges under the various Customs Procedure Codes (CPCs), Honourable Gondwe said the codes will be amended.
The amendment will include a provision requiring full payment of taxes upon change of use or the intended purpose that made the project qualify for tax concessions.
On VAT measures, the Minister revoked a provision to allow for recovery of the purchasing costs of EFD machines that was introduced under the EFD Regulations in 2014, noting that it has achieved its intended purpose.
He however highlighted that operators will still be able to expense the cost of purchasing EFDs under the Taxation Act.
“Mr. Speaker, Sir, the administration of VAT has been improving over the years, and to enhance compliance and collection of VAT, a provision will be introduced under the VAT Act allowing for registration of VAT Withholding Agents who will be able to withhold the VAT at source and remit to Malawi Revenue Authority (MRA).
“Government will introduce a requirement under Section 34 of the VAT Act for submission of VAT returns to MRA on imported services. This measure will be applicable only to services delivered by Non Residents who are not registered for VAT and this will be a compliance measure,” he said.
The budget stressed Government commitment to improve transparency in revenue management and accountability in the extractive Industries Sector. It was highlighted that with the assistance from GIZ, Malawi is working on the production of the second Extractive Industry Transparency Initiative (EITI) Report for the country.
“Mr. Speaker, Sir, in order to encourage mineral exploration in the country, the VAT Act will be amended to allow mining companies in the exploration phase to register for VAT. This will ultimately reduce their costs, as the companies will be able to claim their input VAT,” said the minister.
He noted that investment in mineral exploration is risky and very expensive hence the need for Government to provide a conducive environment to attract mining exploration investments.
For income tax measures, an increase of the tax free income bracket under Pay-As-You-Earn (PAYE) was announced from K30, 000 to K35, 000 per month in order to improve the disposable income of taxable salaried persons.
“To enhance taxpayer compliance and record management in the administration of PAYE for salaried employees, the Taxation Act will be amended to introduce a requirement for the registration of the salaried employees and issuance of Taxpayer Identification Number (TPIN) by MRA,” Honourable Gondwe said.
He said there will be some administrative measures on income tax aimed at improving efficiency, enhancing the integrity of the income tax system and facilitating automation by MRA through a bill to be presented later.
“There will be amendments in the Taxation Act covering Non Resident Tax, interest on loans, debt equity ratio for the mining sector including provisions covering charitable and non-profit organisations,” he said.
BY HENRY MCHAZIME
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