60-year-old UK tax deal with Malawi needs urgent reform | ActionAid UK

60-year-old UK tax deal with Malawi needs urgent reform

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The UK’s tax treaty with Malawi, signed during the colonial era, makes it possible for UK companies operating there to pay little or no corporation tax.

ActionAid is today launching a campaign calling for reform of the 1955 UK-Malawi tax treaty.

Malawi is the poorest country in the world. GDP per person is just $255 per year, less than a dollar a day. The whole country has only around 300 doctors for 16 million people. Raising more revenue from taxing multinational companies that operate there could improve chronically underfunded public services like schools and hospitals.

UK companies are the third largest investor there, with investments worth a total of US$157 million in 2010.

Yet the outdated and unfair tax treaty has tied the hands of the Malawian government. The treaty was signed in 1955 by the British Governor of Malawi on behalf of the governments of the British colonies of Southern Rhodesia, Northern Rhodesia and Nyasaland.

The UK-Malawi tax treaty has undergone few changes since and is so out-of-date that it does not cover the taxation of television related income. The treaty also makes it possible for British multinationals to easily move money out of Malawi, untaxed, using methods such as interest or management fee payments, dividends or royalties.

A previous attempt to renegotiate the unfair UK-Malawi tax treaty stalled. ActionAid is today launching a joint campaign and petition with Malawian activists calling on the UK Government to renegotiate the treaty.

Anders Dahlbeck, ActionAid Tax Policy Adviser, said:

“The tax dodging row about multinationals like Google shows how angry the British public are that big business isn’t paying its fair share. This is part of a global problem that hits the poorest hardest. Developing countries are estimated to lose US$200 billion a year to tax avoidance by multinational companies, with women and girls living in poverty paying the price as schools and hospitals are starved of cash.

“It’s time for the UK government to make tax fair and put the fight against poverty at the heart of its tax policy. Ministers must work with Malawi to renegotiate the tax treaty to ensure that UK companies pay their fair share in the world’s poorest country.”

 

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