ActionAid International has claimed that Malawi lost about K970 billion ($3 billion) in five years through what it called harmful tax incentives given to foreign investors to attract investment into the country.
Following the revelation in a report which also indicates that most developing countries face similar challenges, ActionAid International has since urged the Southern African Development Community (Sadc) governments, currently meeting in Malawian capital, Lilongwe, to urgently review and remove such harmful tax incentives in the region.
The ActionAid report, released in June 2013, indicates that from 2008 to 2012 about $3 billion in Malawi alone “was foregone”, and that this is almost exactly the same amount as the corporate income tax raised during that period.
The foregone money is enough to have funded the previous two national budgets and could also have helped reduce the country’s dependence on foreign aid, which contributes 40 percent of the country’s budget.
The report indicates that at global level, developing countries lose between a combined $120 billion and US$160 billion in revenue a year through tax avoidance and that almost $138 billion dollars in revenue could be raised every year if the developing countries eliminated some corporate tax incentives.
The report, titled Giving Us a Break: How Big Companies are Getting Tax Free Deals, chronicles how big multi-national companies are reaping off developing countries, including on the African continent, through harmful tax incentives while poor masses get nothing from the investments.
Briefing the press ahead of the Sadc Heads of State and Government Summit which opens on Saturday, ActionAid Africa advocacy coordinator Henry Malumo said it was time Sadc governments stopped such incentives so that investments help to uplift lives of people who he said need the money most.
“They should give us a break. It is unfair, unjust and unacceptable that multi-billion companies should be given tax holidays while the poor masses are forced to pay taxes. We are calling on the new chairperson [of Sadc], President Joyce Banda to demonstrate renewable action on this,” he said.
Malumo said that the Tax Power Campaign appreciates the efforts being made in the Sadc region on its attempts to come up with standard guidelines on investors, but he said there is need to speed up the process.
ActionAid Zambia economic justice officer Kryticous Nshindamo said it is also important that governments in Africa and other developing nations learn to involve their parliaments when negotiating deals to avoid underhand agreements that end up costing the people.
ActionAid Malawi country director Martha Khonje said it is sad that despite recent increases in foreign investment, there has not been a significant increase in corporate tax contribution to the national budget, which is currently at 16 percent.