Mejn, Action Aid fault tax system

The Malawi Economic Justice Network (Mejn) and Action Aid have faulted Malawi’s tax system arguing it subsidises foreign companies and have since launched a campaign for reforms.

In a telephone interview, Mejn executive director Dalitso Kubalasa said the campaign, which was launched on Thursday, in Lilongwe, is aimed at bringing together views and propose changes to the current tax regime so that it benefits the economy.

However, in an interview yesterday, Ministry of Finance spokesperson Nations Msowoya, said they are open to constructive proposals on reforms to the current tax regime.

“We are open and at this stage, we welcome all proposals that would help Malawi be efficient in its tax system.

“We are collaborating with a number of stakeholders to ensure that we give tax holidays only to those investments that will benefit the country in the long-term. The Ministry of Finance in collaboration with the Malawi Investment Trade Centre [Mitc] and others stakeholders will track investors that fold up just before their tax holidays expire,” said Msowoya.

In a press statement this week, Mejn and Action Aid said the tax justice campaign is advocating for tax reforms that high income earners pay proportionately more tax to promote equity.

The civil society organisations (CSOs) have argued that if government implements the reforms it will contribute towards reduced debt and promote sustainable development.

The CSOs note that although Malawi falls within the Southern Africa Development Community (Sadc) range there are many incentives especially in extractive sector that have been given.

But recently a paying taxes report prepared by Price waterhouse coopers (Pwc) said Malawi’s total tax rate on businesses rose by 2.5 percentage points to 34.9 percent between 2011 and 2012.

The report attributed the increase in the tax rate in the period to a rise in the effective rate of employer pension contribution and changes in stamp duty on property sales.

And in the 2013/14 budget, government removed taxes on safaris and shuttle buses and re-introduced a provision under the Customs and Excise Tariffs Order to allow for exemption of taxes on importation of specialised mining and exploration machinery and equipment.