Government’s desire to widen the tax net by introducing value added tax (VAT) on water and electricity has not only left consumers with an economic burden, but is also denying some their right to basic necessities, it has been established.
In April this year, Electricity Supply Corporation of Malawi (Escom) said it had introduced VAT on electricity on the cost of its services, including capital contribution (gross amount paid by the customer), rechargeable works, reconnection fees, disposals and penalties levied on customers such as illegal connections and power factor charge in compliance with the VAT Act of June 2006.
VAT on all water bills, on the other hand, was introduced on water as part of a strategy to widen the tax base.
However, since VAT was introduced, consumers have increased their spending on the utilities ,thereby reducing their purchasing power.
Mzuzu-based consumer Brian Nkhonjera said they now pay an average of K20 000 per month on water bills despite not spending time at home.
“We used to pay an average of K8 000 per month on water bills, but now we pay over K20 000. Our crime is that we have a toilet and tap in the house and we are being considered as privileged,” he said.
Consumers of electricity have not been spared either.
“It is much cheaper to buy electricity in large units because you are taxed for every transaction. But money is scarce [and] to survive in town, there are so many things that you have to spend on,” said Blantyre-based Escom pre-paid customer Steven Milepa.
Consumers Association of Malawi (Cama) executive director John Kapito said VAT on water and electricity has been an economic burden and has not served its purpose of reducing poverty on people that pay such a tax.
“Our inflation has gone down drastically influenced more by the food basket and it is important to start reviewing policies and taxes on the non food items,” he said.
The Institute of Chartered Accountants in Malawi (Icam) president Henry Chowawa has called for a review of tax policies, saying the current VAT on water and electricity calculated at 16.5 percent is not justifiable as they are basics.