Ecama, tax expert urge withholding tax on rental incomes

Ecama, tax expert urge withholding tax on rental incomes

Economics Association of Malawi acting president Bertha Bangara-Chikadza has urged the government to enforce the collection of withholding tax on rental incomes to boost the country’s capacity to generate revenue.

The recommendation comes at a time when the government has launched several initiatives to broaden the tax base, including through the use of third-party data matching to bring taxpayers into the formal system.

Chakhaza: Government can increase revenue

In a telephone interview, Bangara-Chikadza, who is also an economics lecturer at the Malawi University of Science and Technology, said the government can further broaden the tax base by enforcing withholding taxes on rental incomes.

She said: “With the boom in real estate holding, the government can increase revenue in withholding tax on residential rental income, and also city rates. Furthermore, the tax threshold for taxes in city rentals needs revision.”

She said the revenue collected from withholding taxes on rental incomes, city rates and ground rates can be used to offset the perennial fiscal deficits that have plunged the country into unsustainable debt.

The government, through the Ministry of Finance and Economic Affairs signalled its intention to enforce this tax in the Memorandum of Fiscal and Economic Policies signed with the International Monetary Fund in November last year.

The memorandum reads: “Realising that there are more Malawians who have several residential rental houses but are not paying taxes, we have embarked on a project to register all houses in cities and towns and start enforcing the payment of rental income tax.”

In reaction, tax specialist Emmanuel Kaluluma backed the decision to register all residential houses, saying the public should not have an option to defer the application of a law that has already been implemented.

He said: “It is the revenue collection body [Malawi Revenue Authority] which is failing to enforce the law to the full because our system is not based on schedular income but all income must be put in one basket then assessed to tax.”

He, thus, urged the local revenue collecting body to transition to a system where individuals are asked to complete tax returns.

Said Kaluluma: “On these tax returns, taxpayers will be required to declare all the income they earn including passive income such as bank interest rents and so on. When everyone is paying taxes, chances are that the tax rates will come down.”

The post Ecama, tax expert urge withholding tax on rental incomes first appeared on The Nation Online.

The post Ecama, tax expert urge withholding tax on rental incomes appeared first on The Nation Online.