TABLE OF CONTENTS

Chapter

1. INTRODUCTION………………………………………………………………
i. Problem Statement
ii. Research Objectives
iii. Research Questions
iv. Significance of the study
2. LITERATURE REVIEW
i. ,,
3. RESEARCH METHODOLOGY
i. Research Design
ii. Location of the study
iii. Target population
iv. Sampling Methods
v. Bias in Sampling
vi. Data collection

Appendix…………………………………………………………………………………

A. Questionnaire
Chapter 1

Introduction

Many developing countries including Malawi, rely on taxes for their social-economic
growth. Taxes provide revenue for federal, local, and state governments to fund
essential services, i.e., defense, health, welfare, and Social services. Most developed
countries in the world have well-structured modern tax systems used to raise revenue
and provide quality public goods and services. However, many developing countries
have limited capacity and are still in the paper era. Economic development in
developing countries have led to the emergence of modern tax systems which has
ultimately improved revenue collection and tax compliance. Many developing countries
however, only administer taxes to a small fraction of businesses thereby milking the
same category of taxpayers. The outcome of such events is non-compliance,
smuggling, resentment and poor revenue performance. Many tax administrators in
Africa rely on employment tax like Pay as You Earn (PAYE) and consumption tax like
Value Added Tax (VAT) to raise revenue. Malawi is indifferent to tax issues affecting
which affects the economic growth of the country. The agency that administers taxes in
Malawi is the Malawi Revenue Authority (MRA) reporting to the Ministry of Finance
(MOF). The Malawi Revenue Authority was launched in February 2000 and formed to
improve on the functions previously carried out by Divisions of Customs and Excise,
and Income Tax in the Ministry of Finance.

Problem Statement

The Malawi Revenue Authority has initiated various reforms in recent years to create
better working relationships, increase tax compliance, and strengthen integrity. One
such reform is the Msonkho Online system which presents a modern way of carrying
out tax transactions. However, MRA still struggles with issues of non-compliance,
smuggling, corruption, and resentment which ultimately affects revenue collection.

A lot of these challenges stem from poor customer service, manual systems, corruption,
and non-standard services.

MRA implemented the Msonkho Online system to counter these challenges.

Research Objectives

The study wishes to find the following

Main Objective

 Studying the effectiveness of the Msonkho Online System on tax compliance and
revenue collection

Specific objectives

 Assessing the adoption rate of Msonkho Online by small, medium and large
taxpayers
 Assessing the impact of Msonkho Online on tax payment and submission
 Assessing the challenges encountered by small, medium and large enterprises
when transacting on Msonkho Online.

Research Question

The study is designed to answer the following questions that provide the focus of
investigation.

 Is the Msonkho Online System accessible and user friendly?

 Does the system ease the submission and payment of returns?
 How is the Msonkho Online System performing?
 Do you prefer the adoption of the Msonkho Online system as opposed to the
manual systems
 Has the Msonkho Online System improved your overall tax transactions?

Significance of the study

Establishing the effectiveness of the Msonkho Online System on tax compliance and
revenue collection will lead to an increased public understanding of how the Msonkho
Online System operates, its importance and why MRA encourages it’s adoption.

Until recently, no research has been conducted on assessing the impact of Msonkho
Online on tax compliance and revenue collection. This research will therefore provide a
foundation of providing a public understanding of Msonkho Online as a tool for
promoting tax compliance and revenue collection.

The findings of this study will alert MRA on what challenges taxpayers encounter when
using the Msonkho Online System. The study will also inform taxpayers of their
obligations in adopting the new system as we are headed to the paperless era. The
Msonkho Online system will assist the Malawi Revenue Authority by improving tax
compliance, transparency and taxpayer relationships which will ultimately lead to
increased revenue collection.

Through the data analysis this research will provide, future researchers may explore the
relevance of the Msonkho Online System in promoting business growth for small
taxpayers and medium taxpayers.

Literature Review

This chapter reviews literature on the benefits of Msonkho Online in regards to filing
returns, tax registration and payment, as opposed to manual tax transactions. In
addition, the chapter will review theories pertaining to the subject matter of discussion
(specific objectives and research questions) as presented in chapter one.

Tax eligibility

Worldwide tax summarizes that any person operating a business in Malawi becomes
potentially liable for tax and has to register. Any tax registration be it for a Malawian
citizen or foreigner is currently done on the Msonkho Online System. World wide tax
summaries emphasizes that, where eligible businesses fail to register, the
Commissioner General is mandated to proceed with the tax registration.

Currently, taxes in Malawi are divided into

The Msonkho Online System

According to the Malawi Revenue Authority Website, Msonkho Online is a web-based

system designed to provide a premier online taxpayer service, where you can quickly
and easily register for tax, file tax returns or make tax payments via www.mra.mw. The
public Service Reforms report has stated that already, the Msonkho Online system has
transformed the country’s tax collection operations making obsolete weak manual
systems previously prone to fraud and corruption. Through the web-based solution, the
management of taxes such as Income Tax, Value Added Tax (VAT), Withholding Tax,
Fringe Benefit Tax (FBT), Provisional Tax, Turnover Tax (TOT), Pay as you Earn
(PAYE) can be done at the click of a button.

The report further states that implementing Msonkho Online provides the Authority an
opportunity to improve the management of taxpayer compliance in terms of registration,
filing and payments, as well as enable taxpayers meet their obligations. Through
statistics complied so far, it is evident that Msonkho Online has managed to increase
revenue collection through increased compliance.

The BNN.Network reports that in a bid to promote tax compliance, MRA has recently
upgraded its Msonkho Online System as part of its modernization reform. The System
will enhance MRA’s image, widen the tax net, and enhance taxpayer service and
education.

Delloitte explains that the 2023/24 budget themed “Sacrificing today for a better
tomorrow, regaining macro-economic stability and growth through collective
responsibility”, speaks directly to the Malawi Revenue Authority. The Authority has an
important role of ensuring that the government has collected sufficient revenue to drive
Malawi’s economy.

The 2014 Taxation Amendment Act states that

Research Methodology

This chapter presents the description of how the research was carried out. It points out
the different types of research methodologies which will be used in this study. This
chapter will include the design, location of study, the population, sampling methods,
sample size, data collection procedures and research instruments.

Research Design

A research design is the process used to analyze data, interpret results and
disseminate the findings. It can either be qualitative, quantitative or a mixture of both.
Our study focuses on a quantitative design hence the use of statistical methods to test
hypotheses. This is because the Malawi Revenue Authority uses quantifiable data to
establish how well it has done in a given financial year. The disadvantage of using this
design is that it does not provide in-depth information since quantitative data provided
by questionnaires merely describe the phenomena.

Location of the study

The location of the study is Blantyre, a city located in the southern part of Malawi with a
population of 1,031,000.

Target Population

The target population of the study are tax registered businesses under small, medium or
large categories. This is because the Msonkho Online System caters for any individual
or business willing to remit taxes at the Malawi Revenue Authority.

Sampling Methods

This research focuses on a subset of the population due to cost implications and the
workload. Therefore, the sample size engaged was enough to reflect the true events on
the ground. This study focuses on non-probability sampling, only accounting tax
registered businesses that will ultimately be selected by chance. This will erase any
traces of bias and will produce a generalized study. Non-probability sampling will also
present cheaper alternatives, convenience and no risk of non-representative sampled
as with probability sampling.

The demographic sample is indicated in the table below

Interviewees Gender Business Number of years in

Occupation operation
Interviewee 1 Male Sole Proprietor 5 years
Interviewee 2 Male Sole Proprietor 2 years
Interviewee 3 Female Partnership 8 years
Interviewee 4 Male Company 15 years
Interviewee 5 Female Sole proprietor 7 years
Bias in Sampling

These important biases will be taken into consideration during the sampling of this
research:

 Businesses located outside of Blantyre will not be considered

 Business not available due to reasons unknown to the researcher will be
replaced with other businesses
 Businesses operating in Blantyre but not registered for any tax will be omitted.

Data Collection

The data collection instrument that was used in this research was a questionnaire. This
is because this study is descriptive in nature. The questionnaires were self-administered
to participants and given ample time to answer the questions. The data collected was
precise and mostly reflected behavioral characteristics. This was done to understand
behavioral patterns of how taxpayers are perceiving the Msonkho Online System.

Sample size

The sample size of the study is 30-40 participants. The participants will be a mixture of
small, medium and large taxpayers located in Blantyre Township. The sample will
enable the researcher to derive accurate results based on the thumb rule. The thumb
rule recommends that a sample of 30 participants are enough to satisfy statistical
requirements and reduce costs and time in data collection. There will be 40
questionnaires that will be issued to the participants.

Research Instrument

The data collection method that will be used in this research is a questionnaire. The
data requirement

Data Analysis and Presentation

Due to the nature of the study being quantitative, the research will use the STATA tool
for data analysis and presentation. The data will be analyzed by descriptive statistics.
Budget of the research

The cost breakdown of the research process is as follows:

Item Explanation Cost

Airtime This item was used to buy 50,000.00
data and phone call
bundles to engage with the
participants
Photocopy and printing The questionnaire was 25,000.00
administered using hard
papers and required
printing and photocopying
Travel Fuel This was the costs 150,000.00
incurred while travelling to
the participant’s business
premises
Stationary Pens, paper clips, filing 50,000.00
folders and markers
Total K 275,000.00
REFERENCES