Govt to plug mining sector leakages

The Malawi Economics Justice Network (Mejn) has called for the urgent need for government to ‘plug leakages’ by both large and small-scale miners by ensuring enhanced compliance of mining tax revenue, among others.

The network has also urged    for the strengthening of transparency, accountability and security systems in the sector which it says is becoming another key mainstay through its contribution to the Gross Domestic Product (GDP).

Mejn executive director Dalitso Kubalasa has said this as part of Civil Society Organisations (CSOs) submissions into the 2014/15 budget, expected to be submitted before parliament in September, 2014.

“As CSOs, we believe there is need to plug leakages, particularly by the large scale as well as small scale miners, that are depriving the economy of huge amounts of Revenues through smuggling, under-invoicing and even externalisation of proceeds,” said Kubalasa.

He said there is need for consolidating efforts through the Extractive Industry Transparency Initiative (EITI) principle of balancing benefits accruing to Mining Companies and those accruing to the fiscus and Initiate the mineral value addition and beneficiation programs to create more jobs through all potential backward linkages.

The Mejn boss said although the sector booming, it is still riddled with too many flaws in the legal framework hence creating the leakage of potential tax collection.

On mining sector coordination, Kubalasa, quoting representatives from local councils, said mining is still controlled at the central government level and argued that to effectively coordinate mining activities at the district level requires more officers to be stationed at local councils.

“It was further reiterated that there is a need to devolve a portion of revenues from mines and National Parks to local councils so they can benefit from increased funding,” he said.

He said stakeholder consultations also showed that people are wary of Escom’s monopolistic tendencies and bemoaned the fact that the Energy policy is rigid as it does not allow other actors to play a role in the sector.

Last year, ActionAid International, through its report on Malawi, revealed that the country has lost over K970 billion through various tax incentives offered to companies, a figure which according to Business News Analysis then was enough to fund three national budgets without deficits.

Malawi Growth and Development Strategy II identifies mining as one of the priority sectors mining has potential to raise export earnings and promote economic growth

Currently, main tax instruments in the mining sector include a corporate income tax of 30 percent for locally incorporated companies and 35 percent for foreign incorporated companies,10 percent withholding tax on dividends,10 percent resource rent tax when Internal Rate of Return (IRR) exceeds 20 percent and 16.5 percent value added tax (Vat) on goods and services.