By Burnett Munthali
Introduction
Vendors at Tsoka market in Lilongwe on Wednesday 20 March 2024, stormed the Malawi Revenue Authority (MRA) offices demanding the tax collector to reduce taxes on second-hand clothes bales. The vendors who came in large numbers were marched to the tax collector’s offices carrying placards with different messages demanding MRA to do something about the high taxes.
Tax
Tax is a charge levied by government on property, income. It is a contribution cost duty expense fine levy price rate tariff. A tax is also a mandatory fee or financial charge levied by any government on an individual or an organization to collect revenue for public works providing the best facilities and infrastructure.
Taxes are the primary source of revenue for most governments. Among other things, this money is spent to improve and maintain public infrastructure, including the roads we travel on, and fund public services, such as schools, emergency services, and welfare programs.
Tax And The Laws
When you do not pay your taxes by the due date, you will start to accrue interest and penalties on the outstanding amount. As time passes, you may be subject to liens on your property or garnishment of your wages. In the most extreme tax evasion situations, you may even be subject to up to five years in jail and in fines.
History
The first record of taxation dates back 5,000 years to ancient Egypt. Before they were even using coined currency, the Pharaoh collected a 20 percent tax on all grain harvests. Julius Caesar implemented the first sales tax, and his great nephew slash adopted son, Caesar Augustus, instituted a direct income tax.
During the late Roman empire the level of taxation progressively needed to increase as the Roman empire needed to continue funding the military. Most of the responsibility for taxation fell on the lower classes and especially the farmers.
By the reign of Diocletian 90 per cent of the government’s revenue came from tax on agriculture. This was possibly a major factor in the inability of the empire to adequately man its legions. Bureaucrats used their position of authority to evade taxes, leaving the burden of taxation on the poorer citizens. By now, taxes consumed more than one third of most farmers’ gross income. Emperor Constantine refused to place the empire’s revenue back into circulation, thus hurting the economy, and forced farmers to sell their goods at low prices due to the emperor’s economic policies.
Preventing them from gathering the funds necessary to meet the high tax burden. People who were unable to bear this burden would have agreed to become indebted to landlords in exchange for protection, effectively transforming them from free citizens into serfs. The poor flocked to these estates, and as they grew the usage of money became increasingly rarer. This crippled the economy and the ability of the military to gather the necessary funds. The poverty-stricken lower class often turned towards crime.
Heavy taxation made the Roman government appear as oppressors, possibly contributing to the loss of provinces such as Africa. Germanic incursions forced the emperors to lower tax rates in the year 413. The government of Rome also decreed that for five years, the tax rate of Italy was reduced by 80 per cent. Despite these reductions, the provinces of Rome struggled to pay their taxes, and the Roman government was unable to receive the funding it needed. Increased levels of inflation reduced the value of the money the government received in taxation.
The difficulties in receiving proper tax funds impaired the Roman state’s ability to adequately fund the army. Most Late Roman tax money was used to pay off Germanic peoples. Unfortunately, I don’t think the tax money is being used for the intended purpose in Malawi. Most of the tax payers money is abused by government and that’s why there’s a suggestion that we should shoot a federal government system because we seem to have failed to improve the country from the past 60 years since independence.
Macroeconomic Effects
Increased Government Revenue: A rise in income tax for people on high incomes can increase government revenue, which can be used to finance public goods and services.
The increase in government revenue can provide additional resources for the government to invest in public goods and services, which can have a positive impact on the economy. However, the increase in tax rates can also reduce economic growth, as it reduces the incentives for work, investment, and entrepreneurship.
This is exactly the case with Malawi today. Malawi Revenue Authority (MRA) is given a target for which they must collect tax. The adjustment in tax on second hand clothes sparked a serious debate.
One of the Asian businessman told me yesterday thata bail of second hand clothes (kaunjika, kabwandile, salaula) had risen from MWK250,000 to MWK500,000. That exorbitant enough to kill small businesses in the country.
Reduced Consumer Spending: A rise in income tax for people on high incomes can reduce consumer spending, as people with high incomes will have less disposable income to spend. This can lead to reduced demand for goods and services, which can have a negative impact on the economy.
Conclusion
Finally, Tax rates have a substantial impact on businesses, influencing their profitability, investment decisions, and overall financial health. Tax rates can affect businesses:
Profitability: Tax Expenses: Higher corporate income tax rates directly reduce a company’s profits. A significant portion of a business’s earnings may go toward paying taxes, leaving less available for reinvestment, dividends, or growth. I therefore stand with the vendors in their protest against raising high taxes at this time when everything is at a standstill. Thanks to MRA for reversing new tax measures. Malawians are suffocating with high taxes, they can’t breathe !
 offices demanding the tax collector to reduce taxes on…){kind=link}