CSOs accuse businesses of resisting VAT reform

Civil society organisations have backed the rollout of a new electronic tax system while accusing sections of the business community of resisting reforms aimed at tightening Value Added Tax compliance.

Addressing journalists in Lilongwe on Friday, the CSOs under the Centre for Democracy and Economic Development Initiatives umbrella said the shift by the Malawi Revenue Authority (MRA) from Electronic Fiscal Devices to the Electronic Invoicing System marks a critical step in curbing revenue leakages.

Cdedi Northern Region coordinator Gomezgani Nkhoma said resistance to the system is being driven by traders seeking to protect unfair gains.

“Those that have skinned Malawians alive through unfair trading practices and under declaration of VAT are mobilising and financing protests to block the transition to a more reliable invoicing system,” he said.

Nkhoma dismissed claims that the EIS introduces a new tax, describing it as a technological upgrade designed to improve compliance and enhance transparency in VAT reporting.

The CSOs further alleged that some businesses are manipulating public sentiment by portraying Malawians as overtaxed, while diverting VAT proceeds meant for public services such as healthcare, infrastructure and civil service salaries.

“We demand greater accountability. At the same time we are urging authorities to conclude high-profile tax evasion cases, including the long-standing K16 billion Mapeto case as well as to review tax confidentiality laws which we feel shield offenders,” Nkhoma said.

On its part, MRA maintains that the system will not increase the tax burden on traders.

In an earlier interview, MRA spokesperson Wilma Chalulu said the EIS is simply an advancement of the EFD framework introduced in 2014, aimed at improving efficiency and easing compliance.

“The world is moving on. Technology has moved on and we would like to make taxpayers’ compliance easier. The EIS is merely a system that is technologically more advanced,” she told The Nation in February.

Chalulu countered claims that the system would impose additional financial strain noting that it is accessible online in real time and comes at a lower cost compared to existing devices.

Business operators, however, have pushed back against the new system, warning of potential disruptions and added pressure on already strained enterprises.

In a petition to MRA a couple of months ago, the traders argued that the system’s requirements, including declaring stock values for tracking, could cripple small businesses operating under difficult economic conditions marked by rising fuel price increases and currency instability.

Limbe Local Shop Owners Association secretary general Chisomo Rodger questioned the inclusion of small-scale traders, saying many do not currently use electronic fiscal devices and already face multiple tax obligations.

“We are already passing through tough times following recent fuel price rise and devaluations. Our fear is that bringing this system will finish us and our businesses,” the petition insisted.

But governance analyst Undule Mwakasungula said while some concerns from traders may be legitimate, resistance to the system cannot be divorced from longstanding compliance gaps.

“There is reasonable concern that some of the resistance to the EIS is not just about fear of change, but also about protecting unfair practices. VAT abuse, such as not issuing receipts or underreporting sales, has been a known challenge,” he said.

He said the system has the potential to level the playing field by ensuring all businesses meet their tax obligations.

“It will help create fairness in ensuring everyone pays what is due. Therefore, the concerns about abuse are not exaggerated, they reflect a real governance issue that needs fixing,” he said.

On transparency, he noted that improving compliance must go hand in hand with safeguarding taxpayer information.

“This transparency should be about systems and accountability and not exposing traders’ business secrets. What is important is that MRA must use the data responsibly, only for tax purposes,” he said.

Mwakasungula further argued that the success of the reform will depend on public trust in how tax revenues are managed.

“MRA must show clearly how tax money is used, in terms of improving service delivery and reducing corruption. When Malawians see that their taxes are making a difference, they will be more willing to comply,” he said.

The rollout of the new VAT system, initially scheduled for February, was deferred to May 1 following concerns from traders, highlighting the tensions between tax administration reforms and business realities.

The debate now exposes a deeper fault line between enforcement and compliance, with civil society framing the reform as a necessary tool against tax abuse, while sections of the private sector view it as another layer of pressure in a fragile economic environment.

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