Malawi survival lies in taxing corporation: Seeks fair returns from mining investments

Malawians must forget the possibilities of bilateral donors bringing back their aid purses to Malawi, regardless of the fiscal management improvements put in place,  ActionAid Malawi Country Director Martha Khonje  has said, pointing out that saying the most paramount source of this funding is fairly taxing corporation so as to raise more revenue.

Khonje: pain could be less if there was equity in how multi-national corporations operating in the country pay taxes.

Khonje: Malawi  pain could be less if there was equity in how multi-national corporations operating in the country pay taxes.

Khonje said on Wednesday in Lilongwe during the launch of the ‘tax treaties’ report that it is only fair that multinational corporations pay a fair share of the profits that they make in Malawi.

The report titled: ‘Mistreated: The Tax Treaties that are Depriving the World’s Poorest Countries of Vital Revenue’ states that tax treaties that aggressively lower tax contributions in lower-income countries “have no place in the 21st century”.

“Malawi is in a funding crisis following the withdrawal of direct budget support, and the governments need more money to provide quality public services such as health and education. However, negative impacts of a broken global and national tax system continues to perpetuating inequality and poverty, particularly to women and girls” said Khonje

She further said problem of corporate tax avoidance has been high on the political agenda in Malawi, at the African Union and at global level and it is the major challenge for developing and least developed countries, which rely more heavily on tax revenues.

Therefore, she recommended that to address the matter changes are required such as updating the global and national tax rules which allow companies to get away with paying little or no tax.

“Our recommendation to the government is that they should review all existing tax treaties not only with the UK but all other governments that Malawi has tax treaties with. Those [tax treaties] that are not working to our advantage should be renegotiated,” said Khonje.

She added: “The withdrawal of direct budgetary support by our development partners has left a huge funding gap in the government funding envelope, so we need to generate more revenue and fair tax from multinational corporations is the way to go.”

Minister of Finance Goodall Gondwe in his budget speech, of the 2015/2016 fiscal year agrees that it is was unlikely that the country’s bilateral donors will ever resume budgetary assistance following revelations of massive looting of public funds by greedy civil servants and businesses in what is known as the cashgate.

Khonje with  ‘tax treaties’ report

Khonje with ‘tax treaties’ report

However, in same budget speech, he reiterated that it is crucial for Malawi to start restricting its fiscal framework without expecting the budgetary support that the country has been accustomed to receiving from development partners since its independence.

Governance Officer for ActionAid Chisomo Manthalu during presentation of the study revealed that the IMF estimates shows that developing countries currently lose US$ 200 billion every year to tax avoidance.

“I would like to emphasize this very strongly. Tax treaties between countries play a facilitating role in many of tax avoidance schemes used by multinational corporations to reduce their tax liability”, he said.

He also highlight that, for instance, in 2015 a study on how Malawi lost US$ 43 million in revenue over a six years , from a single company- the Australian mining Paladin company through a combination of harmful tax incentives from the Malawi government, not only that, but also tax planning using tax treaty shopping.

Government need to urgently consider the treaties which restrict the taxing rights of Malawi and multinationals pay their fair share of tax, and subject the treaties to far greater public scrutiny. Thus, it is so as to reform and curb base erosion and profit shifting and improving corporate transparency and also Taxation Act should be reviewed to improve their effectiveness and align them to best regional and international practices.

Follow and Subscribe Nyasa TV :

Please share this Article if you like Email This Post Email This Post

More From Nyasatimes

More From the World

8 thoughts on “Malawi survival lies in taxing corporation: Seeks fair returns from mining investments”

  1. Sisndi says:

    What is Action AIDS plan on what they have yelled about>

  2. It may well be time to renegotiate outdated tax treaties, however Action Aid overstates the potential benefits.

    They have not published any calculations of the amount of revenues that they think might be gained by renegotiating the treaties, but simply make sweeping claims that corporate tax could be the ‘paramount source’ of public revenues, and ‘the way to go’ in addressing the Malawi’s budget woes.

    This is wishful thinking. International donors have traditionally provided around 40% of Malawi’s budget. On average in developing countries corporate income taxes account for 16% of government revenues (compared to around 8% in high-income countries). Tax treaties might make a few percentage points of difference, but this is not enough to fill the gap from the withdrawal of direct budget support. Further wishful thinking is demonstrated by the case of Paladin – a shuttered mine will not yield tax revenues, whatever treaties are in place.

    Malawi is being ‘Mistreated’ by an international campaign which is playing down the critical importance of improving public financial management, while offering a pie-in-the-sky promises of huge revenues from squeezing foreign investors more. It is simply irresponsible.

    http://www.cgdev.org/blog/malawi-cant-afford-evidence-free-tax-campaigns

  3. James says:

    Can I marry you Martha ? You are beautiful.

  4. Napwito says:

    Atumbuka ……i hate these people.

  5. fkr says:

    Poorest Nations…..with the Richest Leaders. I am sorry action aid, I think you have it wrong. Our leaders are taking all the money that is supposed to be used to serve the people. Do we really need new Soccer stadiums in Lilongwe and Blantyre? Do we need presidential villa’s? Multi national corporations that are listed on stock exchanges run under very strict rules and are audited regularly by international auditors to ensure that they stick to the rules, they normally also drive development, have strong social responsibility programs which look after the environment and people, help the needy, look after schools and orphanages. Lets get to the grass roots of the problem…..we don’t have ethical leaders who will use the taxes collected to build a strong transportation backbone, build the required power infrastructure and educate the people, once that is done everything else falls into place.

  6. Mvula J. Mvula says:

    The only continent that has a lot of raw resources which if better harnessed and used would redeem the economy is Africa. Talk about precious stones (gold, diamond, uranium, rare minerals – you name it), agriculture (Look at the green belt from Nile to the Cape). Look at the Natural Resources (Rivers, Lakes, tributaries – you name it). Yet, Africa is the poorest continent. Is it a resource curse? Well, perhaps we need to take stock of our corporate responsibilities and political will. As for Malawi, look at the natural resources including the minerals we have. God has given us all and we are poorest because we fail to define ourselves and our destiny. The resuscitation of our economy to redeem ourselves from the multifaceted poverty needs collective moral responsibilities including the tax treaties mentioned.

  7. Eluby says:

    You guys are just barking like rabid dogs. What has Action Aid done to people? These guys are busy enriching themselves at the expense of the poor. You can not just utter shit without giving out the probable solutions. You need to account for all the money you idiots have received against the benefits accrued to beneficiaries.

  8. KUKHALA says:

    I ENTIRELY AGREE THAT MOST TAX TREATIES ARE NOT FAIR FOR MOST DEVELOPING OR SAY MOST AFRICAN COUNTRIES.

    THE TAX TREATIES ARE LONG OVERDUE AND MALAWI MUST TAKE ACTION WITH IMMEDIATE EFFECT.

Comments are closed.