Thousands of Malawi businesses close in protest over tax changes

Demonstrations across Malawi’s four main cities during the past week have achieved a delay in the introduction of a new tax regime that business owners claim will cripple their livelihoods.Tens of thousands had signed petitions which this week were presented to tax officials and on Monday thousands of small traders shut up shops and businesses to hold protest marches in Blantyre, Lilongwe, Zomba and Mzuzu.The actions have achieved a delay in the rollout of the electronic invoicing system (EIS) introduced by the Malawi Revenue Authority, a more detailed tax regime than existed previously. Due to be introduced this week, a transition to the system has now been postponed until April.It was the latest sign of unrest in a country facing significant problems tackling aid cuts, foreign currency shortages, and resulting rises in the cost of necessities. Protests over food and fuel prices in September and November were hijacked by political groups, with outbreaks of violence.President Peter Mutharika, elected last year with a promise to restore the economy, has carried out adjustments to fuel, electricity and VAT, with fuel prices rising by 41% and electricity by 12%.Those who closed their shops and walked to tax offices, dressed in black and carrying placards criticising the revenue authority for prioritising “hitting the target” of revenue collection and “celebrating” while vendors are having to shutter their businesses, are especially struggling over import and export of goods.A shortage of foreign currency, they say, is pushing them to buy the dollar for imports at almost three times the bank rate.“Our businesses are under threat because of the economy,” said Robert Nachamba, a representative of small business owners, after a group of 1,000 protesters delivered their petition at the Blantyre revenue authority offices.“The country does not have foreign currency in the banks and now the Malawi Revenue Authority is coming with issues that threaten our businesses even further.“When we think about how tough things are in the country, our pain is that there is a lack of foreign exchange which forces us to buy it on the black market because it is not available in the banks. Now we have already got it at an abnormally high rate and now we need to declare the prices of goods to the tax authorities? This will make the prices of our commodities higher even compared with our neighbouring countries and we don’t need that system,” he said.“We closed our shops and travelled to submit our petitions. That is why they were peaceful because we can’t destroy our own shops.”Malawi’s minister of finance, Joseph Mwanamvekha, has told citizens to “remain resilient” as the government implements tough economic measures to stabilise the economy, cut expenditure and “improve revenue collection”.But economists warn that while the measures are technically rational – including the introduction of the electronic invoicing system to improve administration and combat tax evasion – businesses in the informal sector need to survive.Malawian economist Bertha Bangara-Chikadza told the Guardian: “The [policies] are being implemented under extreme macroeconomic challenges. If the government can use the resulting revenue to stabilise the economy and improve public services, it may indeed be a good step. However, if the increased tax burden fails to translate into improved infrastructure and energy, it risks further straining an economy.”Malawi is the latest in a string of African economies, including Kenya, Nigeria, Egypt and Uganda, to implement mandatory electronic invoicing and “real-time tax reporting systems” as part of a trend to improve revenue collection and reduce fraud.