Tax expert cautions calls for tax reforms

Tax expert Emmanuel Kaluluma has cautioned against calls by the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) for a simplified tax system which provides incentives to promote export-led growth.

In an interview on Wednesday, Kaluluma, who is a senior consultant at EK Tax Consultant, said while non-satisfaction with tax administrators could lead to non-compliance, reviewing tax reforms could have an impact on domestic tax mobilisation.

His caution follows a proposal by MCCCI contained in its first quarter economic review.

MCCCI wants a review of taxes applied on the benefits of employees (fringe benefits tax), value added tax (VAT) on a number of products where Malawi is not competitive and avoidance of tax discrimination on tax breaks where priority has gone to foreign investors.

The chamber also wants government to reduce or remove excise taxes which go as high as 90 percent, introduce rural-based incentives for companies that want to invest in rural areas such as tax allowances, tax holidays, lower corporate or income tax, grants and subsidies.

The private sector lobby group also wants government to fast track the implementation of National Single Window—a trade facilitation idea to enable traders to submit regulatory documents at a single location or single entity—to combat smuggling of goods at the border to ensure that local businesses survive.

But Kaluluma said the valuation of VAT on exports depends on the destination principal, where the export destination countries have their own rates.

He said: “If clients perceive a harsh tax system they don’t comply, so this is what we are facing now. It is advisable that government discusses this with the businesses because it is them who produce the money and if they think government is taking all their money, they can’t get motivated.”

In May last year, Minister of Finance Goodall Gondwe announced that government would shift from reliance on revenue from taxation of labour and investment to consumption in the medium-term, as it continues to embark on expanding the tax base.