MCCCI laments taxes, Chakwera for dialogue

President Lazarus Chakwera yesterday urged the private sector to use dialogue to resolve policy issues, particularly concerning taxation.

The President said this at the opening of the 34th Malawi International Trade Fair (MITF) at Chichiri Trade Fair grounds in Blantyre in reaction to the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) concern that the country’s taxation system is punitive.

He said there is need for authorities to engage in a special forum where such changes could be made to provide a conducive business environment for locals.

In his address, MCCCI president Wisely Phiri said the current tax structure is affecting the existing corporate players and acts like a deterrent to potential small and medium enterprises (SMEs).

He said: “Our taxation policies should deliberately be inclined to favour investment and production and not act as a deterrent.

“For example, the recently introduced additional 10 percent corporate income tax for profits above K10 billion will discourage capital intensive investments in the country as investors will be required to pay 40 percent corporate tax on their profits irrespective of the amount invested.”

Phiri, who is Sparc Systems managing director, said despite offering tax holidays to foreign investors, the tax regime is not favourable to local firms as they are subjected to high corporate tax without any waiver during their inception years.

He said: “This is creating a tough environment for the SMEs that are so vital for our economic diversification and job creation.

“Imagine a young entrepreneur, full of energy and innovative ideas, registering a new software company today. They are immediately hit with a tax burden exceeding 50 percent, including a 20 percent withholding tax.”

Phiri said the tax is only waived after they have navigated two challenging years and proven their compliance by obtaining tax clearance.

Minister of Trade and Industry Sosten Gwengwe said in an interview that his ministry will keep on engaging the private sector and the Malawi Revenue Authority on policy issues, including taxation.

He said: “There is need for continuance engagement just to make sure that the business environment keeps on improving.

“In the business environment, you look at tax policies, general policies as well as legal framework and I think there are strides being made.”

On the trade fair, Gwengwe expressed satisfaction with the quality of the products being showcased, saying it highlights strides attained in value addition.

He said with the mega farms set to increase production, there is hope to see more import substitution through value addition which will save foreign exchange and position the country towards economic growth.

This year, the number of companies exhibiting their goods and services has increased from 134 last year to 167, including foreign exhibitors from four countries, namely Zimbabwe, Mozambique, Tanzania and Kenya.

The fair themed ‘Boosting Malawi’s export capacity through enhanced production’ runs up to May 29.