‘Foreign taxes can lessen budget cuts’
As Malawi continues feeling the pinch of the suspension of direct budgetary support from development partners, an anti-poverty organisation argues the pain could be less if there was equity in how multi-national corporations operating in the country pay taxes.
ActionAid International states in its tax treaties report that tax avoidance strategies used by some multinational corporations deprive poor countries like Malawi of vital revenue which could be used to improve social services, among others.
For over 60 years now, some United Kingdom enterprises operating in Malawi have not been paying taxes due to a double taxation avoidance treaty which the two countries signed before Malawi became independent.
Malawi also has an ‘outdated’ tax treaty with South Africa—which is second largest in terms of investments in the country—and the treaty waives some taxes for South African enterprises operating in the country.
ActionAid Malawi Country Director Martha 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”.
“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.”
Last month, British High Commissioner to Malawi Michael Nevin told Malawi News that the UK had already been in contact with Malawi on the revision of the tax agreements even before the campaign by ActionAid.
While the tax agreement with the UK entails mutual benefit, Malawi has evidently been on the losing end because it does not have any substantial investment in the United Kingdom.
But the government still argues there is no evidence that the agreement has motivated some British investors to deprive Malawi of its revenue.
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