High and unfavourable tax policies are stifling investment in Malawi forestry sector, a development that Mwapata Institute says ultimately limits its vast potential for investment.
In its policy brief titled ‘Plantation Forestry in Malawi: Challenges and Policy Options’, the local think tank noted that current tax policies on forestry products are discouraging local and international investors from pouring their resources into revamping the sector.
It reads: “In Malawi, the 16.5 percent value-added tax (VAT) is charged on most forestry machinery, equipment and tools, including fire trucks, tree-growing inputs, and personal protective equipment.
“This adds to the cost of producing forest products. Further, unlike the illegal charcoal, legal and sustainable charcoal is charged VAT thereby making it 16.5 percent more expensive.”
Mwapata Institute research fellow Maggie Munthali, a co-author of the report, notes that the lack of investment compounds other challenges such as lack of resources to develop plantations, lack of proper forestry infrastructure and corruption.
The report notes that lack of investment due to high taxes limits the ability of businesses to modernise and engage in essential forest management practices, such as replanting and fire prevention. Local communities, who rely on plantations for jobs and income, are also affected as opportunities for growth remain stagnant.
The report’s authors, thus, urge the government to overhaul its tax policies to support long-term sustainability. They opined that the sector will remain stagnant and miss out on key economic opportunities without the reforms.
Says Munthali: “Create a conducive policy and regulatory environment to increase private-sector investments in plantation forestry through fiscal instruments such as VAT exemptions and tax breaks that incentivise private-sector for sustainable plantation forest management.”
In an earlier interview, Minister of Natural Resources and Climate Change Michael Usi, who is the country’s Vice-President, called for the removal of all corrupt individuals in his Ministry to unlock its potential as a catalyst for economic transformation.
“Corruption must be eradicated like a cancerous tumour, removing all corrupt officials from the system,” he said. “Corrupt officials will exploit loopholes in our systems if left unchecked.”
Ministry of Natural Resources and Climate Change Principal Secretary Yusuf Nkungula is on record as saying investigations into allegations of corruption in the ministry were underway.
He, however, stressed that it would take time to gather relevant and actionable evidence that can lead to convictions.
