Economic experts urge tax reforms
Economic analysts have urged local tax authorities to reform the tax system to address the leakages that undermine the effectiveness of tax administration and boost the country’s capacity to repay its existing debt.
The recommendation comes after International Monetary Fund staff called on tax authorities in recipient countries, particularly in developing and emerging market economies to broaden the tax base, reduce tax exemptions and increase the efficiency of tax administration to increase revenue.
IMF researchers Allison Holland and Ceyla Pazarbasioglu in a blog post published on the fund’s website reiterated the fund’s call for effective tax administration to improve their capacity to repay existing debts, which the Bretton-Woods institution says is undermining service delivery in many low-income and emerging market economies.
It reads: “And those with high debt vulnerabilities can’t afford to wait. Policy reforms are needed to boost growth and capture more revenue from that growth, for instance, through tax reforms. This will directly improve countries’ key debt metrics and ensure they can avoid a costly debt crisis.”
But local economic analysts Bertha Bangara- Chikadza and Dalitso Kubalasa have urged local authorities to focus on addressing the leakages amid concerns that raising taxes or removing exemptions can dampen prospects for local demand growth.
Bangara-Chikaza, who is also the Economics Association of Malawi vice-president, said in a WhatsApp response that there it too much leakage in the country.
She said: “There is too much tax leakage in the country that if tax collection was enhanced and all leakages closed and we do not spend properly what we collect, more of which is lost in procurement processes.”
Agreeing with Bangara- Chikaza, Bond Mtembezeka said removing the tax exemptions on building infrastructure can undermine the growth of developing countries.
In a separate interview, Kubalasa, a Public Resource Management expert at the Parliament Support Programme implemented by Democracy Works Foundation and Democracy International, urged local authorities to adopt a “more nuanced approach that combines targeted incentives, capacity building, and ongoing collaboration with stakeholders.
He, thus, urged the government to consider targeted tax credits or incentives, progressive taxation, investment incentives among other interventions to balance between boosting revenue and promoting growth.
Said Kubalasa: “The government should consider creating targeted incentives for investments in key sectors, such as renewable energy, agriculture, and technology; with simulations done on the potential increase in investments and subsequent economic growth, by projecting the impact of these incentives.
