Ministry backs proposal on electronic transmission tax

Ministry of Trade and Industry has backed a proposal by multilateral institutions to extend a moratorium on imposing customs duties on electronic transmissions.

The ministry’s principal trade officer Ezron Chirambo was reacting on Monday to a recommendation in the Digital Trade for Development Report to extend the moratorium, which applies to technical equipment required to facilitate digitalisation of trade services set to expire on March 13 this year.

The report, jointly published by the World Trade Organisation, World Bank, International Monetary Fund and United Nations, said the moratorium delivers benefits by reducing trade costs for digitalised products subject to duties if traded offline.

Reads the report in part: “The moratorium increases consumer welfare and extends access to foreign digital inputs that are key for export competitiveness.”

The multilateral institutions further recommend that member countries should impose value added tax (VAT) on other electronic transmissions such as streaming services and purchasing books online.

But in an interview, Chirambo said the moratorium helps developing countries such as Malawi to access the materials required to create a conducive environment to support the development of digital trade.

He said the proposal to introduce VAT on electronic transmissions could help the government to offset the losses in revenue that may be induced by the transition to digital trade.

Said Chirambo: “Most people are going digital and are buying books or accessing other digital services online.

“Most of these transactions or businesses would be taxed if they were done offline.”

In an interview, Economics Association of Malawi vice-president Bertha Bangara-Chikadza urged local authorities not to “fully commit” to the moratorium until they understand its implications on revenue collection and  to broader impact on trade and industrialisation.

On the other hand, tax consultant Emmanuel Kaluluma said it may be too late to implement the changes, but acknowledged that introducing VAT on electronic transmissions would be a “game-changer and the best antidote against the revenue gap”.