Govt irks tax justice Lobbyists on tax pacts

Two tax justice campaigners have decried government’s handling of Double Tax Agreements (DTAs), arguing that the pacts continue to be conducive enablers for corporate tax abuse in Malawi.

The two—ActionAid Malawi and Oxfam in Malawi—separately said this on Wednesday in reaction to the Corporate Tax Haven Index 2021.

The index has listed top 10 enablers of global corporate tax abuse, accusing them of helping multinationals to abuse corporate tax in developing countries such as Malawi, thereby denying the country tax revenue.

In an interview on Wednesday, ActionAid Malawi programme specialist responsible for accountability and public services Yandura Chipeta said the latest ranking tax havens fuelling global corporate tax abuse enables countries such as Malawi to be sure of the countries they are signing DTAs with.

She said: “Signing DTAs with countries that are tax havens and those indicated as enablers of global corporate tax abuse poses a danger to Malawi and developing countries on generating revenue for provision of public services.”

Chipeta urged Capital Hill to take note of the latest ranking findings related to tax injustice to plan and renegotiate or even cancel DTAs with such countries.

On his part, Oxfam in Malawi governance programme manager Mathias Kafunda said tax havens are the main channel for laundering proceeds of tax evasion and routing funds to avoid taxes.

“The strategic drivers under this harmful practice are weak trade and investment regimes as well as harmful DTAs that countries such as Malawi enter into,” he said.

Kafunda explained that under the joint Public Finance Management project, Oxfam, Lilongwe University of Agriculture and Natural Resources and Economics Association of Malawi want to provide alternative policies at relevant levels of decision-making to contribute towards implementation of progressive tax policies within national investment regimes that support domestic revenue generation.

Ministry of Finance spokesperson Williams Banda agreed that some tax agreements are old, but said Treasury is renegotiating them to level the playing field.

The 2021 enablers of corporate tax abuse, according to the index, include British Virgin Islands (British Overseas Territory), Cayman Islands (British Overseas Territory), Bermuda (British Overseas Territory), Netherlands, Switzerland, Luxembourg, Hong Kong, Jersey (British Crown Dependency), Singapore and the United Arab Emirates (UAE).

They are ranked as the top most complicit tax havens in terms of helping multinationals pay less tax than they are expected to in a particular host country.

The index documents ways in which global corporate tax rules set by the Organisation for Economic Cooperation and Development—a membership organisation made up of high-income countries and the world’s leading rule-maker on international tax—failed to detect and prevent corporate tax abuse.

A recent analysis by The Nation revealed that Malawi’s tax treaties with the rest of the world are costing the country billions of kwacha in forgone tax revenue as some multinationals and private individuals take advantage of some archaic DTAs to avoid paying tax.