Another lesson in how not to expand the tax base.

The Micro Small and Medium Enterprise Order (2020) is being touted by some as a way for MSMEs to benefit from Government procurement.

But whats not being talked about are the far reaching effects that may result from the correct and totally lawful business registration which the order requires.

Isn’t it the case that as soon any MSME registers as a business, the taxman will at that point be entitled to show up, arms akimbo, sniffing for any tax kwachas that may be lurking around undeclared?

Jokes aside, my point is there’s no guarantee that every single business that registers will benefit from the order. This is why in some countries there is always an option to run micro businesses as sole traders where it is in fact the person running the business who is liable for any taxes that may be due.

Malawi currently has a small tax base, and a small private sector. And while on the surface it may appear like a good idea to try and bring into the formal economy as much as possible of the informal economy, in practice that only works when people do actually have significant resources, which is not the case now, for the majority of people in the informal economy – many of whom live hand to mouth. Already, many small businesses complain that they are overburdened by taxes.

What the Government should have done is to focus on the creation of new large corporate entities… beyond Public – Private Partnerships. I mean organisations that can process goods at scale and export large quantities abroad, at a profit.

You can only squeeze so much profit out of a starving donkey which the Malawian tax base currently is. If you push too hard, and burden the donkey with more than it can take, that donkey will crumble and faint. And you will lose out.

A wiser move is to bring additional resources from outside the country. Our leaders are not seeing the bigger picture in this whole equation. The money is not in asking Malawians to pay yet more taxes.

And for those of you saying it would kill local small enterprise, no it would not. Because those corporate entities can actually work with those small enterprises you mention, helping them in more ways than one, minimally, saving them money. Our leaders need to start thinking like business men/ women.

Let me give you a simple example. Suppose the Government of Malawi (GOM) started a shipping company, and bought 2 Cargo Ships. Instead of the local shipping companies paying British or Italian or Greek Ships, GOM can enter the market at attractive terms, so that those local companies instead use the GOM Cargo Ships, saving a bit of money that way. The insurance of the Ships will be provided by local companies. The trucks which collect the containers from the port will come from Malawi… the whole chain will employ Malawian staff … even some of the food, and generally provisions on the ships for the staff who will be working on deck in the weeks that the Ships navigate between the European / American/ Asian ports and African ports can be cooked or prepared by Malawian companies…

How can all that be a bad thing?

That’s just one example in the logistics field which would give GOM millions of dollars in additional revenue, if you consider the annual earnings of other shipping companies that operate between Europe / US and Africa.

It’s a model Ethiopia (and many other countries) uses quite successfully with their airline and their state owned telecom company. We can learn a lot from them.

Trickle down Economics, taxes, fairy tales and other b******t

Today’s looks like one of those days for a tasty little observational theory.

One which says that the trouble with power is that those who possess it rarely want to admit mistakes.

That they don’t want to say we made a mistake, we screwed up, we are sorry, We must learn from this episode. Therefore many people down the socio-economic chain suffer because of that failure to own up to, and admit mistakes.

Further, may I suggest that the reasons behind this attitude or demeanor are partly political, partly ideological, and partly psychological, depending on the circumstances.

For example, how many thieves — who it must be said have a measure of power over everyone else — after committing a theft will return to their hide-outs or homes, sit down guilt-stricken and begin contemplating about the ethics or morality of their actions? No I shouldn’t have done that. I really shouldn’t be doing this kind of things, let me return to that house and undo my crime. I’m in the wrong business, something is wrong with me, why can’t I just earn an honest living like everyone else….

It’s possible that the first few times they may have entertained such conscientious sentiments, but will they be preoccupied with such thoughts months or years into the habit/ behaviour? In the absence of an external stimuli…challenging their comfort zones?

It’s not going to happen because it’s against the unwritten but perfectly understood codes, beliefs and psyche of these people. It’s against the system, the ideology behind what they do, and their frame of minds.
What about the thief who believes a government system is designed ‘to screw you over’, that ‘The powerful protect themselves, they reward each other, and take your taxes’, ‘why the hell should I pay for their merry go round’?

Similarly, how many child abusers will voluntarily renounce their behaviour? What about tax evaders renouncing tax evasion? Corrupt officials renouncing their corrupt practices? Fraudsters finding Jesus…all on their own?

You see … political, ideological, psychological.

Now, I’m not talking about the exceptions such as people who are forced into a certain lifestyle or who end up doing compromising things for survival reasons:- a woman forced into prostitution; a man who has to steal to help his parents or to support his family, no I’m not talking about these exceptions. In fact all such cases say is there is a fundamental failure in society such that it is unable to help those who for all manner of reasons have been pushed onto the brink.

I’m also not writing about people who do certain things because they enjoy doing those things. Pornstars for example who have come out and publicly declared that they enjoy their job. Although even here, the psychological element may be at play.

Someone may say, certain behaviour is driven by fear. That these people think if they stop doing whatsoever unsightly, socially unacceptable, or downright illegal thing they are involved in, they’ll be apprehended by the law, and for some this could mean social stigma or even time in jail.

They may have a point, but what’s driving that fear, if not a belief (even if it’s partly stubbornness) that is psychological in nature?

What about Greed? Is that political? Can be. Ideological? Most definitely. Psychological? In some cases.

Foreign policies of certain countries? 🙂 Domestic policies of certain countries…? Politicians who won’t act to stop tax evasion and illicit financial flows? Is that political? Without a shadow of a doubt. Ideological? Most definitely. Psychological? More probable than not.

No! You are wrong! People do it because other people are doing it! Alright, so they are deciding in their minds, for whatever reason to do this thing which they probably shouldn’t be doing, because someone else is doing it, and then they go about justifying their actions that way? Yes? Ok then in that case it’s both ideological and psychological.

They are sick, mentally they are psychopaths. Alright… isn’t that still  ~  psycho – logic-al… 🙂 ?

They were raised wrongly, or differently to the rest of us, it’s the environment, hence their behaviour. While there may be some truth in this analysis, I don’t entirely buy its determination because it suggests that most of the people involved in harmful, criminal or illegal behaviour are passive if not powerless droids who are shaped entirely by the circumstances around them. What about intent, what about the conscious decision that drives them to participate in something? Is that totally diminished when one grows up in a violent environment, a house full of drug addicts, or dishonest people? What about those people who grew up in certain environments but even from a young age vowed never to be like their parents / the elders who raised them up, or participate in caustic or damaging behaviour? What explains that?

Fear, what about fear? As I said above, fear may be a factor, but it can’t operate alone.

So then, how does all this relate to Trickle Down Economics?

graphic
image from independent.co.uk

Is it possible that despite all that is known about inequality and poverty, those who have the power to change the system are not doing so because of partly political, partly ideological, and partly psychological reasons?

What about those who are negatively affected by inequality and poverty – could it be the case that they too are often unable to act partly because of political reasons, and partly because of ideological reasons, and partly because of psychological reasons?

I’ll be the first to admit that these are not all easy questions (and at no point do I claim to have deciphered it all). After all, the human brain is largely misunderstood, but even amidst such complexity, there are spots of clarity.

So I’ll leave you to think about that while you digest the articles at the end of this post, some of which do a great job at explaining some of these things.

Poverty and inequality are man-made, whether such occurs in Blantyre, Malawi or on the starred streets of Hollywood. I’d go as far as say poverty is essentially violence against defenceless people by the powerful, in that historical exploitation (and in places like Malawi – corrupt officials thereafter) have disadvantaged whole communities, and now, decades later, millions of people struggle to get by as a result. Some are forced to migrate to hostile/ hateful environments, when some of the answers to fixing their problems are available.

But, could understanding these dynamics also at play in criminal minds  be key to understanding why people in positions of influence and power are unable to / choose not to act – even when they should be acting?

African empowerment policies compared

African empowerment policies compared  via LEXAFRICA

Excerpts:

The guidelines, which have been approved by Ghana’s government, propose that local participation in the oil and gas sector be increased to 80% by 2020, with the emphasis on sourcing goods locally and training and employing Ghanaians.

Angolans must hold 51% of the share capital in mining and telecommunication companies and 30% in insurance enterprises. In oil and gas, there are no ownership restrictions on operator companies. However, companies that supply the oil industry with certain general services, such as catering, cleaning and transport, must be 51% owned by Angolans

Mkokweza says the current focus of the Zambian government is on a collaborative approach towards foreign investment. This is despite the domestic pressure on it to reintroduce the super tax on mining investors, which policy had been abandoned in the wake of the global recession, when an estimated 10 000 Zambians lost their jobs.

Comment

While economic empowerment is a necessity for a continent that for centuries has seen its people discriminated against, repressed and taken advantage of, I believe a balance should be reached to ensure that measures for economic empowerment are practical, such that they have been proven to be genuinely beneficial to the populus, and are not misplaced projections of anger or resentment against foreign corporations and businesses, most of whom provide employment and income to the government via taxes.