VAT regressive tax—Gondwe

Minister of Finance, Economic Planning and Development Goodall Gondwe has told Parliament that government is aware that the value added tax (VAT) was hurting both the rich and the poor.

The minister made the remarks when he wound up debate on the proposed 2016/17 National Budget on Friday before the Appropriation Bill was referred to Parliament for debate.

Members of Parliament
Members of Parliament

Gondwe said government was identifying commodities to be included in the VAT tax band as well as those that were previously tax exempted to be taxed.

He said: “In the quest to improve revenue, what we are doing now is to look for a number of commodities that were not taxed before. What we are doing now is to ensure that some of the exempted commodities should now be subject to taxation.

“It means that in some cases we are going to approve fair and unfair things. We are quite aware that what we are proposing under VAT is a great regression.”

Gondwe also told Parliament that Malawi was increasing local tax collection, especially VAT because some of the agreements the country signed under Southern African Development Community (Sadc) were making it difficult to collect taxes from some imports.

In a separate interview later, Gondwe said much as he cannot say whether Malawi was better off being in Sadc, it was a fact that countries whose economies are doing well benefit through association more than those whose economies were not doing well.

He said he could not, off his head, tell whether Malawi was benefiting from Sadc as he needed a piece of paper to do the actual calculations.

Gondwe alluded to the United Kingdom referendum outcome, saying if the UK would resurrect the Commonwealth Agreement, Malawi is likely to benefit from the vote to leave the European Union (EU).

In the week-long contributions, MPs took turns to ask Gondwe to consider reworking on the VAT that has been imposed on basic commodities including laundry soap and salt.

Gondwe reminded the MPs that they should forget donors ever coming back to support the country’s budget hence it was important that he increases the tax collection base.

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