‘Poor negotiations on tax treaties stifle revenue growth’

A tax expert has blamed Malawi’s failure to diversify and maximise revenue collection on poor negotiation skills on tax treaties.

The expert, Emmanuel Kaluluma, who is a senior tax consultant at E.K. Tax Consultants, said if this is left unchecked, it will continue to stifle government’s revenue base.

He said this in an interview on Monday in the context of the 2020 Tax Transparency in Africa Report which has advised Malawi authorities to be more strategic, wise and forward-looking to maximise its limited resources by making use of exchange of information in revenue infrastructure to tackle cross-border tax evasion.

The report says exchange of information in revenue mobilisation is limited in Malawi.

It further urges the Malawi Govenment to also consider removing unproductive tax exemptions and reviewing some tax measures, saying this is key in raising revenues as tax exemptions to foreign firms cost African governments, including Malawi a lot of money.

Kaluluma shared the observations and recommendations in the report, saying the country has not done enough to pursue and negotiate tax treaties.

“When it comes to tax treaties, unfortunately the officials take this as a chance to travel and send people who do not understand tax issues,” he said.

Kaluluma said local authorities should take special interest in negotiating tax treaties, adding that African economies have now grown.

In recent times, Treasury has suffered declining revenues, a development that has affected budget implementation.

For instance, during the 2019/20 fiscal year, domestic revenues were revised downwards to K1.352 trillion.

This revision was largely on account of poor performance in tax revenues due to the challenging economic and hostile political environment that was marred by post-election demonstrations.