UK government urged to end “unfair” colonial-era tax treaty with Malawi

THE UK Government is being urged to end a colonial-era tax treaty with Malawi which campaigners say is depriving the one of the world’s poorest countries of vital resources.

Under an agreement dating back to 1955, it is possible for UK companies operating in the south-east African country to pay little or no tax.

Now the Scotland Malawi Partnership is working with charity ActionAid to call for the UK Government to renegotiate the “outdated and unfair” treaty, which campaigners say is a barrier to raising vital funds to invest in the country’s infrastructure.

According to ActionAid, which works to help women and children in extreme poverty, UK companies invested around £100 million in Malawi in 2010, the latest year for which figures are available. Due to the tiny size of the country’s economy, it makes the UK the third largest investor in Malawi, after Switzerland and South Africa.

Anders Dahlbeck, ActionAid tax policy adviser, said: “Malawi remains on the wrong end of an outdated and unfair treaty with the UK which makes it possible for UK companies to pay little or no tax.

“Women and girls living in poverty pay the price as public services like schools and hospitals are starved of funding.

The Scotland Malawi Partnership is urging Scottish MPs to back the campaign and will be holding a meeting in April to debate the issue with representatives from political parties, civil society and Malawi.“It’s time to make tax fair and ensure that UK companies pay their fair share.”

David Hope-Jones, principle officer with the Scotland Malawi Partnership, said the tax treaty was “unfit for the 21st century”.

He said: “Malawi achieved independence more than fifty years ago, and yet the tax arrangements between our two nations are based on a treaty agreed almost a decade before this.

“The treaty was signed between the UK and the UK’s-appointed Governor of Nyasaland, as Malawi was then: this does not reflect the spirit of dignified partnership which we celebrate today.”

Those living in Malawi also believe the treaty is unfair. Stella Machinjiri, 40, is a teacher at M’bwetu Primary School in Malawi’s capital, Lilongwe, which has a total of 20 qualified and student teachers for 1704 children. She has 285 children in her class and many of the children have to learn outside as there are not enough classrooms.

She said: “Education is important for Malawi as education is the key to everything. The future for the children here would be brighter if we had enough teachers, learning materials and classrooms for the pupils.

“It is very hard to hear that there are big companies that come to Malawi and don’t pay their taxes.”

Patrick Grady MP, SNP Westminster international development spokesman, said the tax treaty was a barrier to the ability of the Malawi Government to raise vital funds to invest in the country’s infrastructure.

He added: “Action Aid and the Scotland Malawi Partnership are making a strong case for the UK Government to step up its efforts to agree a new, fair tax treaty with Malawi, and I and my colleagues on the SNP benches will be supporting those calls in the House of Commons in the coming weeks and months.”

A spokeswoman for the UK Government said: “The UK operates a rolling programme of re-negotiation for its international tax treaties to ensure that they remain fit for purpose. Negotiations on a new tax treaty between the UK and Malawi are on-going with the Government of Malawi.

“It has long been UK practice to include robust anti-abuse provisions in all revised Double Taxation Agreements.””In all of its tax treaty negotiations with developing countries, the UK is committed to ensuring that UK companies pay a fair share of tax in the countries in which they are operating.