Technical Input:

The Malawi Revenue Authority (MRA) has embarked on a comprehensive revenue administration reform program with the objective of establishing a more effective and efficient administration that relies on modern compliance management and targeted enforcement programs. In preparation for an integrated tax management system, the M-Group was selected to conduct a business process review to assess MRA’s overall capabilities and identify areas for potential improvement in each of the core programs within the Domestic Tax Department: Returns Processing, Taxpayer Services, Collection and Enforcement, Audit, and Revenue Loss Preventions.

Development Challenge:

Although Malawi embarked on a modernization effort as early as 2001 with the support of the Royal Danish Embassy, it has struggled with implementation over the years. While overall tax collections have increased, it remains low compared to other countries in the region and significantly below its overall potential. Malawi’s economy continues to face economic risks arising from the limited diversification of the economy, political uncertainties, and governance problems. A buoyant tax base and steady improvements in overall tax administration and collection would help in mitigating these risks.

An in-depth review of each of the core functions was conducted and detailed flowcharts prepared – addressing all aspects of the tax administration life cycle. All available policies and procedures, training material, IMF Reports, Acts Websites, Tax returns, and other informational material available were reviewed. Informal visits were made to various business establishments throughout the country to observe how transactions were handled in the normal course of doing business and to gauge the general feel for tax administration within the country.

The results of the above were summarized into a series of working papers which was utilized as resource material for 2 training/working sessions. To ensure strategies were drafted that would address the specific needs and circumstances of Malawi, as well as, to secure buy-in and commitment from those who were responsible for the day to day operations, a total of 35 participants from around the country were placed into 1 of 5 cross-functional workgroups to critically evaluate the working papers and supporting documents, and international best practices to refine strategies appropriate for Malawi.

From this effort, a modernization plan was drafted to aid MRA in increasing their operational effectiveness, reducing the cost of collection, increase compliance, reducing tax evasion and enhancing taxpayer services.