Dassu tips Malawi on ‘windfall tax’ as Mutharika encourages FDI  

Malawian UK based governance activist Ahmed Dassu   has tipped  Minister of Finance Goodall Gondwe to consider introducing ‘windfall tax’ collected from the two sectors of the economy, which has benefited most from government budgets – the successful bidders of contracts to supply the government going back to 1994 and the mining companies which exploit the country’s mineral resources.

Dassu told Nyasa Times in an exclusive interview in London in reaction to reports that government is looking towards implementing punitive tax measures in a bid to close the 2014/2015 huge budget deficit gaps emanating from the decision by its partners not to support the national fiscal plan.

Dassu shares notes with Mutharika in VIP bus at Kamuzu International Airport: File photo
Dassu shares notes with Mutharika in VIP bus at Kamuzu International Airport: File photo

“Malawi continues to face immense challenges as a result of the donors withholding aid to Malawi. We should all be concerned,” pointed out Dassu.

He, however, said increasing taxation will not be an ideal situation.

“ I think it would be punishing to increase the burden of taxation on the ordinary working Malawian, including the civil servant, police and defence personnel,” said Dassu.

He campaigned for a windfall tax “focusing on the sector where no less than $6 billion of public funds have been shrunk since 1994  first – the supply of pharmaceuticals and FISP fertilizer, it is the same companies in one guise or other who benefited.”

Dassu argued that local suppliers were contracted by successive governments to generate liquidity in the economy to develop the country’s commercial and industrial sector and create employment opportunities.

But  noted that “sadly Malawi has not seen the benefit from awarding contracts to these local enterprises, with the sole exception of an indigenous Malawian business enterprise which has expanded into other fields of businesses thereby creating employment.”

And as for the mining sector, Dassu pointed out that Malawi’s antiquated mining laws which enabled generous incentives to be provided to Paladin for uranium mining in Karonga “ demonstrate that our government has been overly generous to the mining sector.”

He noted: “The fees for Exclusive Prospecting Licenses, Mining Licenses and taxes / royalties on minerals mined, are not in line with the amounts charged in other countries including Zambia and Zimbabwe.

“Therefore a one off windfall tax on these two sectors should be seriously considered. Based on  the value of contracts and minerals mined and sold.”

He said the windfall tax will be “the most prudent, most fair and most painless way of minimizing the deficient in the Budget instead of imposing additional burdens on the working Malawian.”

Recently, Gondwe announced that the 2014/2015 budget is expected to be pegged at K743 Billion (US$1 790 361 446) but admitted that the budget is likely to face challenges in several sectors due to a likely huge deficit.

Major donors are tenaciously gripping to their budget support to Malawi resulting into government facing a huge fiscal gap as resource envelop falls significantly short of the planned expenditures.

Malawi needs adequate domestic revenue to finance critical expenditure on social services such as health and education and narrow the budget deficit—a situation when government spending is greater than tax revenues—in the process.

Meanwhile, President Peter Mutharika has called upon Malawians and those working in government to  “attract foreign investors” saying the opportunities are out there waiting to be tapped.

Mutharika told a news conference in the capital Lilongwe on Tuesday that his government will strive to create an enabling investment climate that will in turn attract Foreign Direct Investment (FDI).

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