With Tsibweni Chalo:
Malawi continues to lose billions of kwacha and millions of dollars to illicit financial flows which include transfer pricing. In fact, experts in finance point out that if all loopholes were sufficiently sealed, the country would have been somewhere far in terms of development.
It would also be difficult to deplete our forex reserves which have a huge bearing on imports and ensure that important commodities like fuel are available in abundance.
Anti-poverty institutions have been fighting for the sealing of loopholes that allow Malawi to lose billions of kwacha in unfavourable taxation treaties and transfer pricing where huge sums which would turn around the country’s development end somewhere else outside.
There have been instances where some crooked businesspeople ‘formally’ externalise forex on the pretence that they are importing goods into the country only for the imports never to arrive at all or to arrive in smaller quantities than would the externalised forex have bought.
Now, the Reserve Bank of Malawi (RBM) is suspecting that our economy has lost $394.60 (about K240 billion) through unauthorised externalisation of foreign exchange by some multinationals through transfer pricing.
These crooked firms would, for instance, take minerals out of Malawi and sell them at a cheaper price to their sister company somewhere outside the country and then tell us that they are making losses. When they take the commodities elsewhere, they will be making huge profits.
The evil trend is common in the mining sector and other sectors which largely rely on local products for their businesses to operate.
RBM and relevant agencies must deal with this problem. It is not new. We have heard a lot about forex externalisation but there seems to be no solution in sight.
Are we admitting that our systems are so loose that they can easily let away billions of kwacha or millions of dollars which would have otherwise improved our ailing health and education sectors?
The poverty that is besetting us should have prodded us into proper action on saving the little that we have. Elsewhere, crimes involving illicit financial flows are taken seriously and State agencies do all they can to deal with them.
We have very impressive laws to deal with such crimes. Why are we not utilising them? Are we protecting some people? Are there some top dogs who benefit from such crimes such that they frustrate every effort to curb them?
Why does it seem like nothing is working in Malawi in terms of dealing with pressing issues that need special attention for the smooth management of the country?
If a nation can report every year that it loses billions of its currency in illicit financial flows but does not seem to have a clue on how to deal with the problem, it raises question on whether those leading it consider that a problem.
Obviously, this is a problem that has once been there in other countries. Why can’t we learn something from others who have reduced the problem?
Of course, experts will argue that it is very difficult to completely deal with financial crimes like transfer pricing because they are very complicated. But at least there should be efforts to reduce the problem.
In fact, there have been reports that some traders do not even use the electronic fiscal devices which aim to maximise revenue collection by the Malawi Revenue Authority.
While it is the duty of the revenue col lector to ensure compliance with the arrangement, everyone has a role to play to ensure unscrupulous traders do not win.
But, sometimes these traders capitalise on weak systems and do all illicit things because they know that even if they are caught, nothing serious will happen to them.
We need to save our kwacha; we need to save our forex. Those employed to do so must seal all loopholes.
A vibrant writer who gives a great insight on hot topics and issues