The African Tax Administrations Forum (Ataf) has called for a balancing act between systematic broadening of the tax base and protecting the public from the tax burden.
The pronouncements by Ataf—a platform that promotes and facilitates mutual cooperation among African tax administrations—comes hot on the heels of initiatives by the Malawi Government to broaden the tax base.
In the 2016/17 fiscal year, government planned to generate money through domestic revenue to finance more than 80 percent of its activities in the wake of budget support freeze.
Already, Malawi Revenue Authority (MRA) has beaten its half-year target by 7.7 percent by collecting K377 billion against the target of K339 billion largely due to improved tax administration and innovation.
Ataf executive secretary Logan Wort said on Wednesday in Blantyre that expanding the tax base does not mean increasing the taxes, but rather increasing the number of people paying taxes so that the amount paid per person is reduced as the burden is shared among many people.
“There has to be proper registration systems so that every business and organisation is properly registered. Tax administrators must make sure that employees from organisations have proper records as taxpayers and incorporate various sectors that we do not usually tax here in Africa such as sports, entertainment and property.
“This will increase the citizenry contribution to taxes and it has the potential of reducing tax rates in the medium to long-term,” he said.
Wort also called for a good relationship between the people and the policymakers to close the gaps in tax administration.
Since the launch of Ataf in 2008, the average tax to gross domestic product (GDP) ratio in Africa has jumped from 18 percent to 22 percent. It is expected to hit 25 percent when issues of VAT fraud and e-commerce technical problems are eliminated.
Tax experts argue that e-commerce poses a challenge in tax administration as most transactions do not leave traces where value added tax (VAT) can be duly traced.
MRA commissioner for domestic taxes Nellie Jimu said while e-commerce reduces the burden of handling hard copy files, there are a number of complications in collecting VAT, which include difficulties in identifying taxable entities, challenges in determining taxing points and difficulties in ascertaining the value of the transactions.
She said despite the challenges faced in tax administration, Malawi’s VAT collections have been growing steadily since the extension from manufacturers to wholesalers and retailers in 2005.
Jimu said there is potential to widen the tax net and collect more revenue, which is essential for financing the country’s developmental programmes.
Treasury hailed improvements in domestic revenues largely due to improved efficiency of the MRA and good economic performance.