James, Kenani (2010): Taxation of Foreign Investments in Malawi. Lessons from Japan.
Download (299kB) | Preview
Foreign investments remain an important source of economic growth in both developing and developed countries. Their contribution to capital formation, employment opportunities, revenues and technology to the host countries are likely to continue creating strong competition among countries in attracting them. In order to be competitive, developing countries provide generous tax incentives to MNEs which tend to encourage high incidence of tax avoidance and evasion. With inadequate institutional capacity to ensure tax compliance, governments are losing more tax revenues from the MNEs who use complex accounting mechanisms to avoid tax payments. This paper has explained how Malawi Government has been taxing foreign investments to achieve optimal balance of increasing domestic resource mobilization and considerably attract new foreign investments. The central objective of the paper was to investigate taxation of the foreign investments in Malawi. The study primarily focused on Malawi tax system in comparison with international taxation from Japanese tax system. Furthermore, the paper investigated tax anti-avoidance measures that are available in domestic legislations which ensure tax compliance from the MNEs. The paper also discussed tax erosion practices that are associated with MNEs such as transfer pricing, internal debt arrangements among others that help to reduce taxable income of the MNEs. The paper has provided the shortfalls of Malawi international taxation system and some practical solutions have been recommended emanating from Japanese tax system.
|Item Type:||MPRA Paper|
|Original Title:||Taxation of Foreign Investments in Malawi. Lessons from Japan|
|English Title:||Taxation of Foreign Investments in Malawi. Lessons from Japan|
|Keywords:||Malaw, Japan, MNEs,Foreign Investments, International Taxation|
|Subjects:||P - Economic Systems > P3 - Socialist Institutions and Their Transitions > P33 - International Trade, Finance, Investment, Business, and Aid|
|Depositing User:||James M Kenani|
|Date Deposited:||19. Jan 2011 12:40|
|Last Modified:||14. Feb 2013 14:03|
Altshuler R and Hubbard, R.G. 2001. The Effect of the Tax Reform Act of 1986 on the location of Assets in the Financial Services Firms. Journal of Public Economics: Vol. 87, pp 109-127. http://www.elsevier.com/ locate /econbase. (accessed on December 21, 2009).
Daniel Phillip. 2006. Malawi Reform of the Fiscal Regime for Mining. International IMF Fiscal Affairs Department. Washington: International Monetary Fund.
Devereux M.P. and Hubbard R.G. 2003. Taxing Multinationals. Journal of International Tax and Public Finance: No 4. Vol. 10. Netherlands: Kluwer Academic Publishers. pp 469-487
Fernandez Prafula and Pope, Jeff. 2002. International Taxation of Multinational Enterprises (MNEs). Revenue Law Journal: Vol. 12: Iss. 1, Article 7. http://epublications.bond.edu.au/rlj/vol12/iss1/7.
Goodspeed T. J. 2006. Taxation and FDI in Developed and Developing Countries. In James Alm, Jorge Martinez-Vazquez and Mark Rider (ed). Challenges of Tax Reform in a Global Economy; New York: Springer Press.
Ietto-Gillies G. 2005. Transnational Corporations and International Production: Concepts, Theories and Effects; Cheltenham: Edward Elgar Publishing Ltd.
Japan. National Tax College. 2009. A Textbook on Japanese Tax Administration. National Tax College. Malawi. Malawi Revenue Authority. 2007. Taxation Act. Government Printing Press. Zomba.
Michalet C. 2000. Strategies of Multinationals and Competition for Foreign Direct Investment. FIAS/PREM Seminar series. http://www.ifc.org/ifcext/fias. (accessed December 17, 2009).
NEPAD-OECD. 2009. Taxation for Investment and Development: An Overview of Policy Challenges in Africa. Documentation for the Ministerial Meeting and Expert Roundtable of the NEPAD-OECD African Investment Initiative. http://www.oecd.org/dataoecd/44/43/43966821.pdf. (accessed December 4, 2009)
OECD. 2001. Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. OECD.
Otto James, Craig Andrews, Fred Cawood, Michael Doggett, Pietro Guj, Frank Stermole, John Stermole and John Tilton. 2006. Mining Royalties: A Case Study of their Impact, Government and Civil Society. World Bank: Washington D.C.
Republic of South Africa. South African Revenue Services. 1999. Section 31 of the Income Tax Act of 1962. RSA. Government Printing Press. Sinaga S.T. 2008. Transfer Pricing and Compliance Problem in Indonesia: A Comparison with OECD and Japanese Tax Provisions. Research Paper. National Tax College.
Third World Network Africa. 2009. Breaking the Curse: How Transparent Taxation and Fair Taxes can turn Africa’s Mineral Wealth into Development. Johannesburg: Open Society Institute of Southern Africa. http://documents.twnafrica.org/breaking- the-curse-march2009.pdf. (accessed on January 3, 2010).
Tseng W and H. Zebregs. 2003. Foreign Direct Investment in China: Some Lessons for other Countries. IMF Policy Discussion Paper 02/3. Washington: International Monetary Fund.
UNCTAD. wir2009. World Investment Report 2009. Agricultural Production and Development. New York and Geneva: United Nations.
United Nations. 2000. UN Model Double Taxation Convention Between Developed and developing Countries. United Nations Publications.
Wamser Georg. 2008. Essays on Behavioral Responses of Multinational Enterprises to International Taxation. PhD diss. University Munich.
Wijeweera A. Dollery, B. and Clark, D. 2007. Corporate Tax Rates and Foreign Direct Investment in the United States. Applied Economics Journal: Vol. 39, pp109-117. http://www.tandf.co.uk/journals/routledge/00036846.html. (accessed on December 4, 2009)