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Government loses K3.9 billion in soft drinks revenue

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Malawi lost K3.9 billion in unpaid tax revenue on soft drinks in 2017 due to an influx of smuggled products, Castel Malawi has said.

The development comes at a time players from other manufacturing sectors such as cooking oil, cigarettes, textile and cement have bemoaned the influx of smuggled products on the market.

Castel Managing Director, Olivier Renson, said from 2015 to 2017 Castel Malawi volumes have declined drastically by an estimated 202,000 hectoliters (3.3 million cases).

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“Year after year the government is losing out on revenue due to the illegal manner of products being brought into the country. The government since 2015 has not been able to realise the true value of revenue

generated through this informal channel. The low sales by local companies such as Castel Malawi result in low tax collections by the revenue authorities.

“Our research has revealed that in 2016 the country lost K1.9 billion in revenue increasing to an estimated K3.9 billion in 2017. This is destroying the economy, business performances and the generation of revenue for reinvestment,” Renson said.

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He said the influx of smuggled products is destabilising the economy as well as the firm’s ability to remain fairly priced in comparison to competition that are not paying tax.

“Informally imported soft drinks are exempt from paying excise duty as such they are more lucrative to the consumer due to lower price points,” Renson said.

He further said smuggled products, especially soft drinks, are a threat to the economic growth of the country.

The Castel Malawi chief said there is no way of telling if the goods coming in are substandard or not, hence it leaves the consumer vulnerable and unprotected by food safety standards.

“The informal imports do not enter the country through official channels and, therefore, issues pertaining to traceability, product recalls, quality issues and consumer complaints are unable to be addressed,” Renson said.

Last year, another soft drinks producer Rim Industries, threatened to relocate to the Democratic Republic of Congo due to the same challenges.

The Malawi Revenue Authority and Ministry of Industry and Trade said they are trying their best to protect local manufacturers from products entering the mar k e t through unchartered routes.

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