Malawi needs to adopt a progressive tax regime, which should allow Malawians to pay taxes depending on their capabilities, an international development expert has advised.
Gilbert Muyumbu, a regional development adviser for MS Training Centre for Development Corporation in Arusha, Tanzania issued the advice at Kambiri Lodge in Salima on the sidelines of a four-day training in tax justice organised by the Malawi Economic Justice Network (Mejn).
Said Muyumbu: “The government can use progressive tax to make sure that the gap between the rich and the poor is minimised. Society is a family and not everyone in the family is equal, therefore, you can create a happy family by doing that.”
His statement comes at a time when Malawi’s tax regime is often perceived as punitive and favouring the rich.
Muyumbu observed that most African countries such as Malawi, are adopting what he described as a regressive tax system, where government imposes huge taxes on everyone including the vulnerable groups.
He cited the imposing of value added tax (VAT) on every consumer which he said often results in penalising the vulnerable segments of an economy.
“In Africa, most of the countries have weaknesses in tax administration and that is why they rarely manage the taxable segments and because of that, most of the countries use retrogressive tax system whereby the poor and the rich pay the same amount of tax,” he added.
He said it was worrying to note that most of the taxation issues such as, raising tax revenue, have often been left in the hands of politicians and technicians.
As such, Muyumbu urged the media and civil society to assess how tax revenue is raised.
According to Muyumbu, inability to generate tax, leads to reliance on external sources of financing of local needs, which he said leads to dependency of control over policy choices.
He commended the media and civil society’s role in Malawi for making sure that they track how government is spending tax revenue.
Minister of Finance Ken Lipenga told Business News recently that currently 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 Lipenga.