‘Supernormal profit’ tax counterproductive –MCCCI

Industry captains have described the extension of 10 percent income tax on profits above 10billion kwacha as a counterproductive move that will discourage big investments.

The Chamber of Commerce stressed this in its response to the proposed tax measures where the said levy was extended to all businesses from banks only.

The tax was introduced in the 2023-2024 budget (on banks only) to generate additional revenue for reconstruction of infrastructure that was damaged by cyclone Freddy.

Justifying the extension of the tax, Finance Minister Simplex Chithyola Banda said: “Government recognizes that other sectors make similar profits as the banking sector.

“Accordingly, the Government is extending the application to all businesses that make such profits to ensure equal and fair treatment of super normal profits.”

However, in its response, the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) views the assumption that profits above K10 billion are ‘super normal’ regardless of how much is invested in the enterprise is utmost flawed.

“The investment capital required for each business is different hence they can never be treated same.

“This policy decision is counterproductive and will discourage big investments as it indirectly restricts investments to investments below K10 billion.

“Furthermore, this policy runs contrary to our aspirations of attracting big mining investors and big investors in mega farms as part of the ATM strategy,” reads part of the statement.

Meanwhile, the proposed additional tax means Malawi’s Corporate Tax could be the highest in the SADC region which could scare away investors to other countries according to the chamber.

Earlier, Press Corporation chief executive officer Ronald Mangani said this tax which was temporarily imposed on banks must be removed as there is no basis of maintaining it.