ActionAid has advised African countries, including Malawi, to ensure that tax incentives are not harmful to the ordinary people.
In its report titled Tax Power Campaign, ActionAid has also recommended the elimination of tax holidays even in the mining sector.
The non-governmental organisation estimates that Malawi lost about $43 million (K32 billion) at a time Paladin (Africa) Limited was operating Kayelekera Uranium Mine in Karonga. The money is enough to pay salaries for 17 000 nurses, according to ActionAid estimates.
Reads the report in part: “Governments must eliminate all corporate income tax holidays [the worse kind of blanket tax incentive that locks in future parliaments] and seriously reconsider tax incentives to extractives companies because investors must come to you.
“There is also need to limit the use of discretionary incentives to special cases and provide transparent explanations for such use. Perform public reviews of all tax incentives currently in place or being considered to allow citizens, parliaments and government officials to weigh the costs of any foregone taxes against potential benefits.”
ActionAid estimates that eliminating corporate tax incentives in developing countries could raise over $138 billion in revenue annually.
On tax avoidance and evasion, ActionAid says developing countries are estimated to lose between $120 billion and $160 billion a year in revenue due to money hidden in tax havens.
But a mining expert Grain Malunga, who is former Minister of Energy and Natural Resources, argues that tax incentives, especially in the mining sector, are crucial because they encourage companies to invest in areas deemed risky by government.
“I would not say tax incentives or tax holidays are bad. They are important, especially in sectors where government cannot invest because they are risky,” he said.
