Study faults MRA’s Electronic Fiscal Devices in Malawi

A study conducted by one of the country’s business persons and also a civil rights campaigner Rafiq Hajat on Malawi Revenue Authority’s (MRA) plans to introduce Electronic Fiscal Devices (EFDs) to compliment its VAT collection exercise by 30th June, has indicated that the plan has been done in hurry.

The study calls upon the MRA to conduct a thorough situational analysis before embarking on the initiative.

“The MRA must delay the roll out by at least eighteen months, in order to ensure that the Electronic Fiscal Devices become a boon and not a curse for the country”, reads the study report in part.

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Hajat, who co-runs Footwear shop in Malawi’s commercial capital Blantyre, bemoans lack of transparency in the plan.

“Only four local distributors; namely Gestetner, Canotech, Xerox and Business Machines, have been awarded with contracts to supply & install the machines and train staff from the client in the usage thereof. Two of these firms are purported to belong to the same commercial grouping, which indicates a lack of due diligence by the appraisal committee” he says.

He also says it is doubtful whether these firms have imported sufficient stocks to satisfy the entire demand (approx 10,000 machines) by the deadline of 30th June.

“It would be interesting to see Bills of Entry to certify that adequate stocks did indeed, enter the country in good time for installation and training. Notwithstanding the current situation, it is highly probable that the appointment of only four distributors for the entire country will lead to logjams and bottlenecks in the future. It is therefore, imperative that more Distributors be appointed in the near future,” he said.

Hajat views the cost of the machines as another area of concern.  He says an   internet   search   reveals   that   the   cost   of   these   machines   from   Datecs,   a   Bulgarian manufacturer, is US$255 (MK105,000 at current exchange rates) at source, but they are being charged out at MK350,000, which amounts to US$850 ­ a gap of 333% (some are being quoted at MK650,000).

“This seemingly exorbitant spread is being explained as having being necessitated due to modification to render the machine country specific and other costs such as training and installation. It is also unclear why one would choose a machine that would require such extensive modification to make it suitable, when it ought to be possible to have purpose built machines made for us in view of the numbers that would be required over the next few years.

“Thus doubts (in the wake of Cashgate/Jetgate etc.) will still lurk in the public mind in the absence of transparency and prior consultation. It would thus be advisable to   resume   the   search   for   cost   effective   alternatives   without   delay   and   with heightened transparency.”

MRA hopes the tax base will widen and value added tax (VAT) collections jump by 20 percent following the introduction of EFDs—an advanced version of an electronic cash register.

Commissioner general for MRA, John Biziwick, told journalists that the rollout of EFDs will play a critical role in improving efficiency and effectiveness in the administration of VAT—a form of consumption tax levied on the purchase price—and also level the playing field.

But Hajat argues that there is a strong feeling of victimisation amongst compliant Tax Payers by virtue of the fact that they are being compelled to conform to various regulations issued by the MRA, whilst non­compliant traders, who come from Rwanda, Burundi and Tanzania seem to operate with total impunity.

“They are alleged to be clearing containers of goods though Customs with minimal duties and they sell their wares in the local markets (with minimal rentals) without having to pay any VAT or other governmental levies. These itinerant traders are suspected to have diverted over 60% of normal trade away from the formal sector and thus diminished the   turnover   normally   generated   by   compliant   traders.”

Hajat says the business  community, understandably, feels strongly aggrieved by this unlevel playing field and expects the MRA to tighten up border controls and close the loop holes that have thus far been exploited by unscrupulous smugglers.

“These measures should be demonstrably be implemented before introducing new schemes that would only impact on those who are already compliant whilst leaving those who are not, to operate without let or hindrance.” he says .

EFDs are being introduced following the enactment of the law in July 2011 to introduce and enforce the use of these devices.

MRA commissioner of domestic taxes Nellie Jimu says the tax collector has been facing tax compliance challenges that include the suppression of sales, non-issuance of tax receipts/ invoices, non- remittance of VAT collected, undervaluation of tax receipts/ invoices, using multiple sets of business records and non -disclosure of branches and associated businesses.

She says EFDs record all sales transactions at the point of sale, have fiscalised memory, which means data cannot be erased, produce fiscalised receipts and uses GPRS/mobile network connectivity to transmit the data to MRA central server.

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