Expanding the Tax Base in Malawi: What Should be Done?

The Malawi Government announced plans to broaden tax base in its fiscal budget for 2010/11. This move is welcome as it will ensure more revenue collection to finance government operations. Malawi’s fiscal budget is financed by tax and non tax revenue and supplemented by domestic and external loans. Generally, It is a wish of the governments to finance its operations by the domestic revenue which can be raised through taxation or other non tax revenue sources, however when the tax base is small, government is forced to either borrow from internal or external sources thereby incurring interest or raise tax rate or broaden the tax base.
 
With growing population and growing needs, it is imperative that at certain point tax have to be increased or broadened in order to finance the needs of a growing population. Research shows that, broadening tax base has never been an easy task as the cost of collecting the additional tax has to be taken into consideration. For the case of Malawi, taxes are already seemingly high and whether to broaden or increase the tax base, it is very critical to consider such. The discussion on MAKNET online platform attempted to find out what could be done in expanding the tax base in Malawi.
 
This policy brief is the product of the synthesis of the discussion on MAKNET on line forum and seeks to draw attention of the policy makers mainly those in taxation areas, planning agencies and its stakeholders on what could be done on expanding tax base as well as increasing revenue to finance budget operations without hurting business