The Institute of Chartered Accountants in Malawi (Icam) yesterday protested the continued taxing of water through value-added tax (VAT) calculated at 16.5 percent and accused government of ignoring its proposal to scrap it off.
In his contribution during a panel discussion at an NBS Bank-sponsored National Budget Analysis Breakfast in Lilongwe, Icam Taxation Committee chairperson Andrew Chioko bemoaned that some of the input provided to the government by stakeholders during pre-budget consultation meetings was not taken on board.
He mentioned the proposal to remove VAT on water as well as an increase in the tax-free bracket from K20 000 to K50 000. In his proposed 2017/18 National Budget, Minister of Finance, Economic Planning and Development Goodall Gondwe announced an expansion of the bracket to K30 000.
Said Chioko: “Removing VAT on milk is good, but we still could have loved if tax on water was also removed. The government should also tread carefully on penalties against those who fail to pay taxes on time because it will encourage other players to work under the radar if taxes are out of this world.”
In an interview later, Consumers Association of Malawi (Cama) executive director John Kapito agreed with Icam, saying the decision to put VAT on water is retrogressive as it is against the spirit and targets of the now expired Millennium Development Goals (MDGs), which sought to increase access to the commodity by the masses.
He said: “Water is life and nobody should put tax on water because it comes from God; and, it is free. I could have had no problems if the VAT was on bottled water, but not tap water.
“Next time then there will be VAT on the air we breathe. This tax is primitive and shortsighted.”
But Ben Kaluwa, an economist at the University of Malawi’s Chancellor College, backed government for maintaining VAT on water, saying it demonstrates progressivity.
“This is what we call progressivity because the more people are willing to pay taxes, government taxes them. What you should know is that poor people from, say Ndirande [Township in Blantyre], do not have taps on their doorsteps and they get it from intermediaries which is more expensive than what we pay. I totally support government on this as an economist.”
In November last year, government included VAT on all water bills as part of its strategy to widen the tax base. n