Malawi Congress Party (MPC) spokesperson on finance Alexander Dzonzi has challenged government to do more on taxation issues, pressing for an overhaul of all tax policies.
Dzonzi, speaking at a recent high level meeting on development effectiveness in Lilongwe, said as it stands now, the tax systems is too ‘labour intensive’ and is burdening the poor.
“More often, the Value Added Tax [VAT] fetches more in terms of revenue seconded by Pay As You Earn [Paye] and ironically, corporate tax contribution is the least,” said Dzonzi, a member of both the Budget and Finance Committee of Parliament and Legal Affairs Committee of Parliament.
The Corporate tax rate in Malawi stands at 30 percent, while the standard VAT is at 16.5 percent. On one hand, the zero rated threshold for Paye stands at K20 000 ($40).
The legislator also said the country’s Taxation Act is one of the oldest laws in the country, which he said needs urgent review to be in tandem with emerging issues.
He also took a swipe at the Directorate of Road Traffic and Safety Services and Immigration Department, saying they are currently using obsolete equipment and hence are grappling to bring to government adequate non-tax revenue.
Dzonzi warned authorities that proceeds from customs and excise duties will continue to dwindle as Malawi intensifies regional integration in the Southern Africa Development Community (Sadc), the Common Market for Eastern and Southern Africa (Comesa), among others.
All the imports into Malawi from member States of Sadc and Comesa are mostly duty-free as per the two treaties that Malawi is signatory.
“Bearing in mind that we are financing our budget using domestic resources, tax is very key and I know government is geared towards broadening the tax base, but we need to do more on taxation by overhauling the tax regime,” said Dzonzi.
The World Bank, in its latest report on Malawi, the Fiscal Monitor, described tax system for Malawi as non-transparent and complex in nature.
The report said Malawi collects tariff revenues primarily from only a limited number of import flows, saying more than half of all imports enter at zero rates of duty, with a further 32 percent entering under tariff lines, with a statutory duty of 10 percent.
Finance, Economic Planning and Development Minister Goodall Gondwe, reacting to Dzonzi, defended Malawi’s tax system, arguing is one of the best tax regimes in the world citing ‘recent studies.’