Taxation and economic experts have asked Malawi Revenue Authority (MRA) to balance expansion of the tax net with eased burden on low-income earners as the authority targets to increase domestic revenues fourfold by 2031.
In its 2026/31Corporate Strategic Plan launched in Blantyre yesterday, MRA said it is targeting higher collections through stronger compliance enforcement, expanded taxpayer registration, voluntary compliance, taxpayer education, digital transformation and greater use of data in revenue administration.
The authority said widening the tax net at the centre of the ambitious plan to increase domestic revenue collections from K6.07 trillion in the 2026/27 fiscal year to K22.51 trillion by 2030/31.
Unpacking the plan at Sunbird Mount Soche, MRA board chairperson MacFussy Kawawa said the authority has demonstrated its capacity to deliver under the outgoing 2020-26 strategic plan by achieving an average revenue collection performance rate of 99 percent and annual growth of about 30 percent.
He said the previous plan exceeded annual targets in four of its six years, including the final year when MRA collected K4.40 trillion against a target of K4.32 trillion in the 2025/26 financial year.
Kawawa said the new plan will build on those gains by expanding the tax base and improving compliance.
“Much priority should be given to advancing ongoing digitalisation, improving taxpayer service delivery, widening the tax net, strengthening compliance management and fostering a vibrant institutional culture,” he said.
Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha, who graced the launch, also said the plan’s emphasis on aggressive revenue mobilisation, tax-base expansion, risk-based compliance enforcement and digital transformation was appropriate at a time when traditional sources of government financing were under pressure.
He said government expected tax measures to be implemented seamlessly, alongside stronger taxpayer education to help citizens and businesses understand their obligations and the contribution of taxation to national development.
Mwanamvekha said in the face of waning donor support and shrinking customs revenue, domestic revenue mobilisation “is the way to go”.
The urgency to widen the tax base is underscored by Malawi’s changing development financing landscape.
Recently, the International Monetary Fund (IMF) warned that the major shift in development financing that began in 2025 was unlikely to be temporary, signalling tougher times for aid-dependent countries such as Malawi.
On the other hand, United Nations Children’s Fund (Unicef) data show that between 2017 and 2023, official development assistance remained Malawi’s largest external inflow, averaging $1.6 billion (about K2.8 trillion) compared with foreign direct investment averaging $144 million (about K252 billion) and remittances at $219 million (about K383 billion).
But while the country seeks to raise more domestic revenue, the scope for government spending remains constrained with nearly 79 percent of domestic revenue in the K11 trillion 2026/27 National Budget absorbed by statutory obligations, including wages and debt servicing.
A Ministry of Finance Tax Expenditure Report shows that revenue forgone through tax exemptions, reduced rates, deductions and credits increased from K370.8 billion in 2022 to K811.6 billion in 2024, with total tax expenditure rising from 3.14 percent to 4.12 percent of gross domestic product.
The report, jointly produced with MRA with technical guidance from the IMF, says the increase was largely driven by government policies aimed at stimulating investment, expanding productive capacity, creating jobs, strengthening food security and reducing the cost of essential goods and services.
Import duty exemptions alone increased from K36.8 billion to K102.9 billion while import excise exemptions rose from K12.3 billion in 2022 to K63.7 billion in 2024.
The Value Added Tax (VAT) Act also contained 174 unique relief provisions during the period. Of these, 15 were classified as benchmark features of the tax system, while 156 were identified as tax expenditure measures.
Speaking during a panel discussion at yesterday’s launch, IMF Malawi Country Office economist Steve Banda said broadening the tax net and modernising domestic tax administration were essential, but reducing tax exemptions would also be critical to recovering lost revenue.
“Domestic revenue sustainability is non-negotiable. Malawi needs to reduce tax exemptions where most of our revenues are lost at the moment,” he said.
United Nations Development Programme resident representative Fenella Frost said widening the tax base should also make formalisation attractive to businesses, warning that excessive costs and complicated procedures could discourage firms from joining the tax system.
“If joining the tax net is costly and complicated, businesses will stay informal and the base narrows rather than widens, at a cost to growth itself,” she said. “The plan’s pairing of stronger compliance with simpler, digital services is the right answer to that risk.”
In an interview last evening, Mzuzu University economics lecturer Christopher Mbukwa said widening the tax base could significantly boost revenue, but only if MRA focused on economic activity with genuine capacity to pay.
He said the authority should use data from banks, mobile money transactions, property, customs and government procurement to identify profitable businesses operating outside the tax net.
“Fair base-widening should protect low-income earners and concentrate enforcement on profitable but unregistered businesses, wealthy landlords and customs under-valuation,” said Mbukwa.
Meanwhile, Economiscs Association of Malawi president Bertha Bangara-Chikadza said shrinking development financing and budget support made the new strategy particularly important as Malawi was increasingly being forced to look inward for resources.
The Danish Trade Union Development Agency’s 2026 Labour Market Profile estimates that 93 percent of workers are in informal employment, more than double the Southern Africa average of 39 percent, raising concerns over tax revenue, job quality and economic transformation.
MRA data also show that tax revenue’s contribution to the national budget has weakened, falling to 67 percent in the 2024/25 financial year from 86 percent the previous year.
Efforts to bring smaller businesses into the tax system have also yielded limited results.
MRA introduced a presumptive tax regime for small and medium enterprises (SMEs) with annual turnover below K12.5 million in 2021/22 and hoped to bring 1.3 million SMEs into the tax net.
However, as of February 2024, only 5 455 new businesses were registered under the system out of an estimated 1.6 million SMEs, generating K40.9 billion in taxes.
Tax consultant Emmanuel Kaluluma is on record as having stated that although tax incentives could support economic activity, their effectiveness depended on whether they were granted and monitored based on their intended purpose.
Read more on MRA Strategic Plan launch in Business News in this edition
