Malawi losing US$87m annually to tax incentives for multinational companies

Education expert Benedicto Kondowe said this amount is enough to enable the government train 385,000 primary school teachers or construct 38,000 classrooms or pay school fees for 100, 000 university students, among other important things in the education sector.

Kondowe, who is also the executive director for the Civil Society Education Coalition (CSEC), said this on Tuesday during a tax justice and illicit financial flows panel discussion.

The discussion was held under the topic: Tax Injustice and Illicit Financial Flows Impeding Progressive Public Financing and Development in the Covid-19 and Post Covid-19 Context.

The discussion was part of Tuesday’s programme of the Southern Africa People’s Summit Network underway at Crossroads Hotel in the Malawian capital, which is a parallel event taking place at a time Southern Africa Development Community (SADC) Heads of State are also meeting in the capital.

Organized by ActionAid Malawi, Malawi Economic Justice Network, Oxfam and Southern Africa People’s Solidarity Network – the panel discussion aimed at informing the SADC Heads of State on how “toxic” tax incentives and other illicit financial flows are depriving the region of the much-needed development.

Kondowe called upon authorities in Malawi and other SADC member states to be decisive in policy decisions to ensure that they preserve for things that really matter the limited resources that are generated.

“In Malawi, for instance, the $87 million could make significant progress in the education sector. If teachers are trained based on the Emmanuel teacher training college model where a student teacher pays $375 per year for a two year course, government would train 383,000 teachers. And we all know that the deficit of teachers in primary schools is only 82,000.

“Or government would construct 38, 000 additional classrooms. And we all know that the deficit of classrooms is 60, 000. Bursaries in the universities where maximum fees per student is MK450, 000 per year, government would assist 100, 000 students with that $87 million.

“On the other hand, choosing to construct secondary schools based on the Unicef model where a single school costs about 350,000 dollars, government can put up 155 additional secondary schools which would improve pupil enrollment into secondary education,” said Kondowe.

Kondowe further called upon authorities to be cautious of the national responsibility and obligation they have to ensure that they provide quality services to the citizenry through maximum collection and proper use of the revenues.

“We should not be over generous in terms of granting unnecessary tax holidays that erode the capacity of the nation to generate more revenues that can boost the education sector and many other important public sector services,” he said.

During the panel discussion, it was noted that Malawi also loses $56.7 Million yearly to tax havens and $56 million yearly to illicit financial flows committed by multinational corporations and global private individuals, respectively.

That means more public service sectors in the country are deprived due to such losses.

Panelists attributed the toxic tax incentives, tax havens and illicit financial flows to “archaic and oppressive” Double Taxation Agreements and “improperly” regulated sales of export proceeds mostly by multinational corporations.

ActionAid Malawi Head of Programs and Policy, Clement Ndiwo Banda, concurred with Kondowe on the toxic tax incentives to multinational corporations, saying the losses really impact negatively on the provision of social services.

“Yes, we know that government is encouraging direct foreign investments that would in turn help create jobs, among other things. However, we are afraid that these come at the expense of government generating revenue that could have helped to get more money to finance public services,” said Banda.

Deputy Director of Revenue Policy in the Ministry of Finance, Grecium Kandio, said the government is reviewing the old and outdated tax treaties to align them with the current best tax practices applicable within the SADC region.

“We are also ensuring that companies that are exporting are registered and licenced. This will ensure that the Malawi Revenue Authority is able to record and track all exports. The Reserve Bank of Malawi will also be able to request the proceeds of those exports so that the country benefits accordingly,” Kandio said.

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