The government says its new electronic invoicing platform will modernise tax collection. Critics say the country is repeating an expensive experiment whose results remain contested.
By Collins Mtika
For the second time in just over a decade, Malawi is requiring thousands of businesses to adopt a new digital tax system, promising tighter compliance and higher revenue.
By mid-June 2026, about 8,300 of the country’s roughly 9,000 value-added tax-registered businesses had onboarded to the Malawi Revenue Authority’s Electronic Invoicing System, according to an authority official, who cautioned that it was not yet clear how many were actively transacting on the platform.
Earlier, in early May, the authority had put the figure at about 7,500. Officials have hailed the rollout as a milestone in the country’s effort to modernise tax administration.
But the new platform is replacing an earlier reform introduced with strikingly similar promises, one that academic studies and government documents suggest failed to deliver the gains officials had anticipated.
The Electronic Fiscal Device regime, launched in 2014, required businesses to use machines that recorded sales and transmitted transaction data to tax authorities.
The Malawi Revenue Authority said in 2014 that the technology would widen the tax base and increase value-added tax collections by 20 per cent. The devices were mandatory. Businesses paid roughly 2.5 million kwacha for the machines, in addition to maintenance costs, according to the revenue authority.
Twelve years later, the government is once again betting technology can solve one of its most persistent fiscal challenges.
The new Electronic Invoicing System validates invoices in real time, assigning each a unique reference number and QR code. Officials say the platform will improve transparency, reduce fraud and strengthen compliance monitoring.
But evidence surrounding the previous system raises questions about whether technology alone can deliver those goals.
A study published in the African Multidisciplinary Tax Journal in 2021, examining data from July 2005 to June 2019, found that value-added tax collections failed to increase following the introduction of Electronic Fiscal Devices and declined as a share of gross domestic product during the period examined.
The researchers also reported a drop in the timely filing of tax returns after the devices became mandatory, concluding that the system did not significantly improve compliance.
Another academic study, focusing on small businesses in Blantyre, found that value-added tax audits explained only about one per cent of compliance behaviour, suggesting that the enforcement mechanisms surrounding the technology remained weak.
The studies cover only portions of the system’s lifespan and are not government audits. Still, their findings challenge the narrative that digitalization alone produced sustained gains in tax collection.
The Malawi Revenue Authority has not published a comprehensive public assessment reconciling these findings with its broader claims about the system’s performance. No public response addressing the specific academic findings was found in records reviewed for this article.
Researchers and government documents point to more fundamental obstacles.
The electronic fiscal devices depended heavily on electricity and internet connectivity, both unreliable across large parts of Malawi. Power outages and network failures often prevented transactions from being recorded in real time.
Businesses could continue operating offline and later decide what information to report. Some transactions were never entered into the system at all.
In cash-heavy sectors of the economy, enforcement proved difficult. Critics argue that the shortcomings reflected less a failure of hardware than of incentives.
The new Electronic Invoicing System addresses some of those weaknesses by moving transaction validation to a centralized platform and making after-the-fact alterations more difficult.
But it does not eliminate Malawi’s large informal economy, widespread cash transactions or the foreign-exchange distortions that many traders say complicate tax reporting. The financial structure of the first reform also raises questions.
When electronic fiscal devices became mandatory in 2014, businesses that purchased the machines within the prescribed window were allowed to recover the full cost through value-added tax credits on the following month’s tax return.
In effect, the government helped finance the very devices it required businesses to buy. Four licensed suppliers, Business Machines Limited, Canotech, Gestetner and Xerographics, provided the equipment.
The state created a guaranteed market, subsidised much of it through tax credits, and expected the investment to generate higher revenue. The available evidence suggests those gains never materialised as originally promised.
The new system removes the upfront hardware cost. The Malawi Revenue Authority says businesses no longer need to purchase devices costing around 2.5 million kwacha, instead using their own computers, tablets and printers. For many traders, that represents a significant improvement.
It also amounts to an acknowledgment that the previous system imposed substantial compliance costs on businesses for more than a decade.
No public accounting of the total cost of the abandoned system, to businesses or to the treasury, was found in records reviewed for this article. The stakes extend beyond technology.
Malawi collects only about 14 percent of its value-added tax potential, according to the government’s Domestic Revenue Mobilisation Strategy for 2021 to 2026.
The strategy estimates that Malawi’s VAT efficiency lags well behind the sub-Saharan African average of 35 per cent and the global average of 51 per cent, measured by the standard C-efficiency ratio.
Modernising VAT administration, the government estimates, could generate additional revenue equivalent to 2 per cent of gross domestic product.
For one of the world’s poorest countries, the implications are significant. Revenue lost through weak tax administration is money unavailable for schools, hospitals and infrastructure.
The tensions surrounding the reform became visible this year.
When the electronic invoicing system became mandatory on May 1, traders shut shops across Limbe, Blantyre, Lilongwe, Zomba, Mzuzu and Mangochi in protest.
In Limbe, in southern Malawi, monitoring by The Nation newspaper found that only six of 136 shops opened on one of the protest days. Supply chains serving small retailers and households were disrupted, creating shortages of everyday goods.
Traders raised a specific concern: Malawi’s shortage of foreign currency forces many businesses to buy dollars on the parallel market at rates far above the official exchange rate.
If inventory is valued using official rates, they argue, the tax system can record profits that do not exist in economic terms.
That concern points to a broader challenge. Technology can record transactions more efficiently, but it cannot by itself resolve distortions in the wider economy.
The Malawi Revenue Authority responded to the concerns by extending implementation deadlines three times, from November 2025 to February 2026 and finally to May 2026, and by doubling the value-added tax registration threshold from 25 million kwacha to 50 million kwacha, exempting smaller traders.
Commissioner General Felix Tambulasi has insisted the system is fully operational and that the reform will proceed.
MRA spokesperson Wilma Chalulu told local media that full enforcement will begin on July 1, and traders who fail to issue EIS receipts will be fined by the authority.
“As we transition to the new system, we are helping traders onboard and ensuring they use it correctly. If there are cases where receipts are not issued, those involved will be fined once we reach the date we have communicated, which is July 1,” Chalulu said.
She added, “We have inspectors who will be carrying out their duties, and we will also rely on the public to inform us, especially after July 1, if EIS receipts are not being issued.”
Malawi is not alone in turning to electronic invoicing. Kenya, Rwanda, Uganda, Zambia and Ghana have all introduced digital tax systems, and the Malawi Revenue Authority cites these experiences as evidence that such reforms can work.
The international evidence, however, is mixed. Research on Rwanda’s digital invoicing system found that compliance gains depended heavily on effective audits and enforcement rather than technology alone.
In Malawi, the government delayed the rollout amid protests while facing growing pressure to raise domestic revenue following reductions in foreign aid.
A 2025 World Bank public finance review found that Malawi’s revenue performance remained below fiscal needs and that compliance was hindered by fragmented data systems and incomplete digitalization.
