Capital market players bemoan 3% stamp duty
Capital market players say the three percent stamp duty on securities is deterring the sector’s growth and has since appealed to the Reserve Bank of Malawi (RBM) to lobby for its reduction or removal.
The three percent stamp duty on secondary trading of shares on the 16-counter Malawi Stock Exchange (MSE) was introduced in the 2022/23 fiscal year, compelling buyers of stocks to pay the tax.
During a meeting with RBM on Thursday in Blantyre, Capital Markets Association of Malawi president John Kamanga urged the regulator to lobby for the removal or reduction of the duty, saying it is a disincentive to the sector’s growth.
He said: “We utilised the meeting with the regulator to voice out our concerns that we believe need to be addressed to promote the growth of the capital market and one aspect is the stamp duty of three percent to be paid by buyers of shares on the securities market.
“This is on the higher side because in other countries within the region, the stamp duty ranges between 0.7 percent and one percent so we are lobbying for its removal or reduction because it is discouraging investment, which is countering the idea of promoting the growth of the capital market.
“Again, if you can recall, the duty was removed a few years ago only for it to be reintroduced,” he said.
Kamanga, who is also MSE chief executive officer, said the stock market remains small and its growth is dependent on tax incentives to attract new listings.
“For example, we were saying for the stock market to grow, one of the elements that can be considered is tax incentives which could entice potential companies to come and list,” he said.
The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) also questioned the introduction of the stamp duty in its 2024/25 budget response, describing it as the highest on trading of shares in Africa.
Reads the MCCCI statement in part: “A stamp duty of three percent is inconceivable and could negatively affect businesses in the sector. It also places Malawi as an outlier country with the highest rate of stamp duty on the trading of shares in Africa.
“The introduction of stamp duty will inhibit secondary trading of shares at a time when the Malawi Stock Exchange is trying to widen its outreach by inviting more public members to participate in the market as one way of reducing the income inequalities that persist between the rich and poor in this country.”
The private sector lobby group said the limitation of secondary trading as a result of the introduction of stamp duty will also affect the value-added tax, which is charged on brokerage commissions, thereby defeating the whole purpose of tax revenue collection from the market.
In his address, RBM deputy governor MacDonald Mafuta Mwale said a vibrant capital market is key to the country’s economic growth, stressing the need for effective collaboration and communication of players in the sector and the bank.
He said there is need to enhance communication between market players and the Registrar of Financial Institutions, adding that cooperation in maintaining market integrity and protecting investors can strengthen the capital markets and the entire economy.
Stockbrokers Association of Malawi immediate past chairperson Noel Kadzakumanja said RBM assured them that going forward, the two sides will be meeting quarterly s.
The association’s membership includes Stockbrokers Malawi Limited, Portfolio Managers Association and Financial Market Dealers Association, among others.
