The Malawi Economic Justice Network (Mejn) has condemned Malawi’s taxation system, saying it is discriminatory and favours the rich more than the poor.
Mejn executive director Dalitso Kubalasa made the claim in Lilongwe on Friday when he presented the institution’s input at the 2013/14 pre-budget consultations presided by Finance Minister Dr. Ken Lipenga.
Kubalasa said: “It [the taxation system] is bemoaned to still be benefiting the rich much more than the poor to the extent that the gap between the rich and poor is getting bigger.”
He informed Lipenga, who was flanked by his deputy Cornelius Mwalwanda, that individuals with small businesses are paying more taxes than corporate entities.
Citing an example, Kubalasa mentioned commercial banks which he said are making huge profits ‘while everybody is struggling and languishing.’
He wondered why banks are allowed to import Auto Teller Machines (ATM’s) into the country duty and value added tax (Vat) free.
He also claimed that as it stands now, Malawi continues to lose a lot of revenue through some of the Foreign Direct Investments (FDIs).
“This is largely through some of the tax holidays, tax avoidance, and tax evasion to foreign investors while ordinary Malawians face a lot of high costs of doing business. Malawi is thus being exploited with little or no benefit,” lamented Kubalasa.
He asked government to rationalise tax inequalities and inefficiencies between the corporate entities and ordinary citizens, by getting in place through a consultative process of key stakeholders, the ideals of good tax regime.
He said government should also ensure transparency in the way it awards tax holidays as well as signing of agreements with FDI entities.
He added: “Further, the payment system for tax and other payments must be electronic to control misappropriation and bribery by collecting agents.”
Similar calls were also made by the Economics Association of Malawi (Ecama) executive director Nelson Mkandawire, who told government to ensure that development agreements with FDIs should involve wide consultations before signing to avoid granting of ‘avoidable tax holiday incentives.’
Reacting to the issues raised on the taxation, Lipenga while welcoming the criticisms, hinted that government intends to broaden Malawi’s tax base in a fair manner that will not penalise Malawians.
Lipenga noted that Malawi is depending on a narrow tax base which he said is inducing Malawi’s over-reliance on donor resources.
“Scaling up revenue collection must be done in a fair manner so that we do not over penalise the existing tax compliant companies. We need to broaden the tax base and ensure that everyone pays their fair share of taxes,” said the minister.