Impact Of Tax Reforms & Government Policies on Tax Growth Betrace Thawi-Malawi

BACK GROUND & PROBLEM STATEMENT Tax collection understandably becomes the prime focus for national development of Both DCs and LDCs. Over third of GDP in OECD is from tax revenues but less than a fifth of GDP in developing Countries particularly sub-Saharan Africa (Alan Carter and Ana Cebreiro (2018) According to IMF report (2015), sub-Saharan Africa remains the region with the world’s lowest ratio of revenue to GDP despite substantial progress in revenue mobilization over the past two decades

STATISTICS ON TAX TO GDP CONTRIBUTION (WORLD BANK,2018) Country Name 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Angola 29 23 27 17 16 12 10 Burundi 14 15 Burkina Faso 13 Botswana 26 24 25 21 Cote d'Ivoire 11 Egypt, Arab Rep. Ethiopia 8 7 9 Kenya Liberia 19 20 Lesotho 48 49 51 58 37 35 46 45 41 34 Morocco Mali Mozambique 22 Mauritius 18 Malawi Namibia 31 30 33 32 Nigeria 2 4 5 1 Rwanda Sierra Leone Swaziland Seychelles 28 Togo Tunisia Uganda South Africa Zambia Zimbabwe

BACK GROUND & PROBLEM STATEMENT According to IMF report (2015) a typical developing economy collects about 15 percent of GDP in taxes, compared with the 40 percent collected by a typical advanced economy In a ministerial statement issued on 15th May, 2018 in Addis Ababa, African Ministers of Finance, Planning and Economic development agreed to boost tax-to-GDP ratio to a minimum threshold of 20 percent of their economies, as part of an effort to realize the Continental Free Trade Area agreement (APA, 2018) A question is how will countries achieve this 20% threshold? This paper therefore intends to provide some of the ways that a country can achieve tax growth through reforms by using Malawi as a case study.

The specific objectives are OBJECTIVE OF THE STUDY The main objective of this study is to assess the impact of tax reforms on tax collection in Malawi. The specific objectives are 1.To investigate the types of tax reforms in customs division and the impact they have had on trade taxes in Malawi 2 .To investigate the types of tax reforms in domestic tax division and the impact they have had on domestic VAT in Malawi

LITERATURE REVIEW A look at successful reforms between 2004 and 2015 in five low-income and emerging market economies which achieved some of the largest revenue gains showed that tax reforms are critical in increasing tax revenues. The experiences of this diverse set of countries namely Cambodia, Georgia, Guyana, Liberia, and Ukraine show that, regardless of the constraints they face, countries can strengthen their capacity to collect tax revenue by pursuing reform strategies Cambodia for example established a large taxpayer office which allows a country to focus tax compliance efforts on the biggest taxpayers. The countries embarked on Enhanced audit and verification program which is risk based audit that links the likelihood and nature of an audit to the taxpayer’s inherent risks Most of these five countries took advantage of IT systems to leapfrog their revenue mobilization reforms. Georgia successfully used smart information management systems for revenue mobilization on managing information and leveraging the power of big data to improve compliance and fight corruption. It automated most processes including e-filing and instituted a system for information sharing among tax authorities, taxpayers, and banks, as well as a one-stop Internet portal. All the five countries established and modernized basic rules and processes for compliance. For instance, Guyana implemented a unique system of taxpayer identification numbers and streamlined its process and also introduced income tax withholding, a measure critical to fostering compliance. In its regional economic outlook (2016), IMF indicated that Sub-Saharan African countries could increase tax revenue by an average of 5 percent of gross domestic product, much more than what they receive in international aid if they reform their tax policies.

Methodology The research is quantitative and used secondary data. To measure impact of revenue growth with each reform, a percentile measurement method was implored using Microsoft Excel package. The research has been prepared following an extensive review of available literature and the greater part of the findings of this research is based on Secondary data analysis.

FINDINGS: CUSTOMS REFORMS & IMPACT FINDINGS: CUSTOMS REFORMS & IMPACT This research undertook a study of all the reforms that Malawi Revenue Authority undertook from the year 2000 when the revenue authority was born. Below is summary of reforms in customs division & impact on revenue collection FISCAL YEAR IMPORT_DUTY (MWK) Growth rate % 2000/2001 2,384,673,985.00 2001/2002 2,347,847,356.00 (1.54) 2002/2003 3,135,658,421.28 33.55 2003/2004 4,470,646,853.00 42.57 2004/2005 6,230,381,416.00 39.36 2005/2006 7,044,542,351.00 13.07 2006/2007 8,793,604,706.00 24.83 2007/2008 11,543,746,402.00 31.27 2008/2009 13,287,099,186.00 15.10 2009/2010 15,075,412,246.70 13.46 2010/2011 16,137,327,353.36 7.04 2011/2012 18,229,794,484.76 12.97 2012/2013 32,881,765,463.16 80.37 2013/2014 41,087,680,892.90 24.96 2014/2015 46,121,307,593.18 12.25 2015/2016 52,866,724,222.32 14.63 2016/2017 69,772,771,374.71 31.98 MRA born ASYCUDA 2.7 version Post Clearance Audit & Risk Management Unit ASYCUDA ++ version Introduction of scanners, DPC ASYCUDA ++ 18e version ASYCUDA World effect – block agents for unpaid declarations

FINDINGS: VAT TAX REFORMS & IMPACT FISCAL YEAR Domestic VAT (MWK) Growth rate (%) 2000/2001 2,428,575,485.00 2001/2002 2,781,289,655.00 14.52 2002/2003 4,006,772,350.92 44.06 2003/2004 5,546,345,429.00 38.42 2004/2005 6,879,850,937.00 24.04 2005/2006 9,110,514,767.00 32.42 2006/2007 12,027,370,303.00 32.02 2007/2008 14,481,172,324.00 20.40 2008/2009 18,625,108,491.00 28.62 2009/2010 21,670,131,502.69 16.35 2010/2011 25,751,171,890.85 18.83 2011/2012 31,017,943,211.05 20.45 2012/2013 40,778,570,415.38 31.47 2013/2014 56,448,693,544.29 38.43 2014/2015 67,149,225,979.20 18.96 2015/2016 75,830,428,987.11 12.93 2016/2017 108,063,503,365.54 42.51 Expansion of VAT NET to have wholesalers & retailers Merging of income tax & VAT office to form domestic tax division Large tax payer office was established mandatory usage of electronic fiscal device machine & msonkho online

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