Ecama backs tax base review plan

Post was last updated: January 11, 2016

The Economics Association of Malawi (Ecama) has backed Finance Minister Goodall Gondwe’s proposal to capture more people and entities from the informal sector in the impending tax net expansion process.

Gondwe, in an interview on Tuesday, said that tax experts from the United Kingdom and the International Monetary Fund (IMF) headquarters would be in the country in a week’s time to start the exercise.

Commenting on the matter, Ecama President Henry Kachaje while supporting the idea, pointed out the need for some investments in infrastructure, capacity building and Information and Communication Technology (ICT) to ease such undertakings.

“That’s a positive direction because the informal sector is huge and can significantly contribute to the tax revenue but we need to properly plan how to administer that probably transition the informal sector into the formal sector,” said Kachaje.

He said it is high time government invested in infrastructure for the informal sector to make the SMEs operate in an organized environment for easy handling of issues like taxation.

Kachaje said with proper identification system traders would be captured into the tax net since their business transactions will be in the financial sector with proper tracing.

Briefing reporters on Tuesday, Gondwe admitted that the challenge remains how to administer the tax collection in the informal sector given that they are disorganized but recognised that there turnover is significant to impact on the revenue collection.

“A week from now we’re expecting experts from London as well as Washington to help us look at what can be done. The thing will be practically increasing tax base, getting more people to be contributing to the tax efforts.

“Unfortunately most of it will be from the informal sector but the question is how do you do that? That’s what we are looking at now,” said Gondwe.

The Finance Minister further hinted that government is reviewing user fees to make sure that some services are provided at a price not less than the cost of provision.

“We’re on our own now (without budget support) and we have to look at a number of things that make us increase revenue and we should increase the ability of sustaining our operations on our own,” said Gondwe.

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