Minister of Finance, Economic Planning and Development Goodall Gondwe yesterday backtracked in Parliament on his National Budget proposal to have mining companies exploring for minerals to claim input value added tax (VAT) from government on the materials bought locally.
The minister introduced the VAT Act Amendment Bill which asked Parliament to delete sections two and three of the VAT Act, effectively removing the mining exploration companies from enjoying VAT exemptions.
This then means, according to Gondwe, that the status quo will remain and that mining companies will not be exempted from VAT during the exploration period. It also entails that all products in the country will be subjected to VAT except children food and honey.
Gondwe also told the House that the objectives of the VAT Act Amendment Bill was to provide for registration of mining projects for VAT purpose, prescribe definition of business, taxable person and to cater for mining projects.
“The amendment will provide for a basis for mining project to be able to claim input VAT and widen the tax base by reducing zero rated and exempt supplies,” he said.
Gondwe thanked members of Parliament (MPs), especially from opposition benches, for fighting for the removal of the mining companies from enjoying input VAT exemption.
But in a separate interview, he said the basis of exempting mining companies from input VAT was to attract companies to invest in Malawi adding that all surrounding countries have removed input VAT for the mining companies.
Gondwe said with the increase on tax base the country was expecting to get K12 billion out of the inclusion of new goods to be subjected to VAT.
People’s Party spokesperson on finances Ralph Jooma said if the law was going to allow mining companies to claim VAT from government then this could have created a lot of pressure on government resources.
He said: “But our point is that government can separate those items—like laundry soap that is used by the rich and the poor are not the same.”