MALAWI’S VAT FRAUD INVESTIGATION UNCOVERS BILLIONS IN POTENTIAL LOSSES

BY GOLDEN MATONGA

The Malawi Revenue Authority (MRA) has suspended at least six officers over an alleged multimillion-kwacha fraud. 

The scheme reportedly involved a group of insiders and certain non-governmental organisations allegedly involved in the fraud, using forged tax exemption certificates to claim taxpayer money inappropriately, the Platform for Investigative Journalism (PIJ) can exclusively report.

Investigators in Malawi are currently probing a substantial value-added tax (VAT) fraud case, with early estimates suggesting the fraud could involve more than several billion kwachas. 

The Malawi Revenue Authority (MRA) and the Fiscal Department of Police, working jointly, have been instrumental in exposing the scheme, sources disclosed to the Platform for Investigative Journalism (PIJ).

The fraudulent operation involved the use of tax certificates to claim VAT refunds from the MRA by organisations falsely asserting they had paid VAT. Under the guise of VAT exemption status, these organisations erroneously received millions in refunds, insiders report.

The duration of these illicit activities is still under investigation, with more arrests expected. Notably, some of the implicated NGOs include those with members arrested last week by the police, along with a former MRA employee.

A senior official at the MRA’s Lilongwe Division, whose name is withheld for legal reasons, is among those implicated, as well as other MRA officials whose identities and roles are currently unknown.

A source elaborated on the fraud mechanism: “Some entities, especially NGOs or Diplomatic entities, are entitled to VAT exemption. Where they have paid for VAT, they are entitled to claim refunds. So there was a scheme where NGOs were making fraudulent claims.”

PIJ now understands the investigation is bigger than just forgery by those previously named and also focuses on the role internal MRA officials played. 

Last week, police arrested and charged former Zomba-based Sammy Aaron alongside three alleged accomplices with four counts of forgery, uttering false documents, obtaining money by false pretence, money laundering and theft related to a K709 million scam. The accomplices are Vincent Mtambalika, an accountant for Action Hope, businesswoman Tiwonge Nsonthi and Justin Bulaula, a former MRA employee. 

However, MRA Corporate Affairs Manager Steven Kapoloma confirmed the investigation in a written response to PIJ, saying MRA and police were progressing in the investigation and the public would be updated once investigations were complete. 

“We confirm that the Malawi Revenue Authority (MRA) is working with the Fiscal and Fraud Unit of the Malawi Police Service to investigate allegations of value-added tax (VAT) fraud claims made by some NGOs. The investigations are progressing well, and so far, some arrests have been made involving both people within and outside MRA. They have been charged with fraud and money laundering. The investigations are still ongoing and going smoothly. Unfortunately, no further information can be provided at this time to avoid jeopardising the investigations. More details will be provided after the investigations are completed.”

Alfred Chimthere, Deputy Police Spokesperson, in an interview, confirmed the police were investigating the matter and its connection to last week’s arrests:

“The investigation is ongoing, but I need to cross-check information on the progress with my colleagues from the Fiscal Department,” said Chimthere.

This case highlights MRA’s enhanced efforts to detect and combat tax evasion, including adopting new technology and public awareness campaigns. It’s a rare success in uncovering high-profile fraud involving MRA employees, celebrated as a significant achievement by those close to the investigation.

More details will be provided as this developing story unfolds.