Malawi hikes tax on internet, duty on SMS: Goodall says local resources to finance 2015/16 budget

Malawi Finance, Economic Planning and Development Minister Goodall Gondwe on Friday said the 2015/16 budget which has no budgetary support from donors will be financed by local resources and announced new tax measures including a 10 percent excise duty to be levied on phone text messaging and all data transfers, including internet and similar services.

“We have to generate adequate local resources to finance our activities,” said Gondwe.

He said the tax on internet has been put following the “tremendous uptake” of the telecommunication services in Malawi and in order to expand the tax base “to generate resources” for the national budget.

Gondwe also announced that government has determined that the excise duty rates for motor vehicles with engine capacity exceeding 3 000cc “are too high” and has been reduced which is good news to the second hand motor vehicle dealers and car importers.

He said to encourage tax compliance; government has decided to reduce excised duty rates on motor vehicles,

“For new motor vehicles up to 8 years old, excise duty will be reduced from 55 percent to 40 percent; for motor vehicles aged above 8 years old up to 12 years, excise duty will be reduced from 88 percent to 60 percent; and for motor vehicles aged above 12 years old, excise duty will be reduced from 110 percent to 80 percent,” said the Finance Minister.

He announced removing tax on radio and television equipment “in order to improve information dissemination in Malawi.”

Excise duty on dry cell batteries that operate light torches and radios used by most Malawians, especially rural dwellers, has also been reduced from 30 percent to 10 percent.

Another tax measure announced by Gondwe was about small-scale cross border traders which will see the threshold value for entry of goods on Customs and Excise form 12 being increased from K100 000 to K500 000.

This, Gondwe said, will likely reduce the time spent at the port of entry for small and medium business people or travellers who import goods from our neighbouring countries, and is expected to support the ‘ease the cost of doing business’ initiative that Malawi government is undertaking.

Government has also revised the minimum fine in the Customs and Excise Act from K10 000 to K100 000 on importers of goods and services.

Gondwe told the House that there are several Taxation Act amendments which government is proposing.

“Exemption from capital gains tax for the transfer of property from an individual into a trust; Clarity on charging of interest. In this regard, MRA will now adopt the bank lending rate plus 5 percent.”

Gondwe said the tax body will levy a penalty if unremitted non-resident tax at 20 percent of the amount unremitted.

He said government wants an amendment to provide “clarity” on what constitutes re-organisation and qualified re-organisation in the taxation ac.

Gondwe also proposes an amendment to provide for the charging of income tax on deemed interest earned on interest-free loans and that the foregone income will be taxable in the hands of the lender.

The Finance Minister said the Taxation Act amendments will be presented to parliament through a bill.

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