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Counteracting Tax Evasion In Malawi: An Analysis Of The Methods And A Quest For Improvement

Listed author(s):
  • Chiumya, Chiza

Tax Evasion is one of the major problems that Tax Administrations face the world over. This is however more pronounced in Developing countries. Tax Evasion is defined in this paper as the act of illegally paying less taxes (or not paying at all) than the amount legally required by the tax law. This is in contrast to Tax Avoidance which contains some elements of legality as it is defined as the reduction of tax liability by practices that take full advantage of the loop holes in the tax law. There are several reasons that have been cited as the major causes of Tax Evasion, especially in developing countries. Among such reasons are high tax rates that increase tax burdens, inadequate and weak tax law legislations which are coupled by lower levels of tax law enforcement, general dissatisfactions with the public service provisions and, the presence and extent of the parallel economy in these countries. This paper focuses on analyzing the methods that Malawi employs in counteracting Tax Evasion and how they can be improved. At the core of the paper is the fact that Tax Evasion can be controlled by looking at the Tax law and also the various administrative measures that go along with enforcing it. It further singles out and recommends reviews in the Tax Law such as the enhancement of penalties and the broadening of transactions that require Tax Clearance Certificates, such as the tendering process. The paper also recommends a review in the staff capacity and its abilities, Assessment system, Incentive scheme and also tackling of the parallel economy in a bid to bring it into the taxable fold through the analyzing of Withholding Tax and Import and Export records.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9892.

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Date of creation: 19 May 2006
Handle: RePEc:pra:mprapa:9892
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  1. Fethi Ogunc & Gokhan Yilmaz, 2000. "Estimating The Underground Economy In Turkey," Discussion Papers 0004, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  2. Fishlow, Albert & Friedman, Jorge, 1994. "Tax evasion, inflation and stabilization," Journal of Development Economics, Elsevier, vol. 43(1), pages 105-123, February.
  3. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
  4. Richard M. Bird & Jorge Martinez-Vazquez & Benno Torgler, 2014. "Societal Institutions and Tax Effort in Developing Countries," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 301-351, May.
  5. Ahmad,Etisham & Stern,Nicholas, 1991. "The Theory and Practice of Tax Reform in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521265638, March.
  6. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
  7. Konstantine Pashev, 2005. "Tax Compliance of Small Business in Transition Economies: Lessons from Bulgaria (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0510, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
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