There is panic and uproar among consumers and experts over the just gazetted customs and excise tariff by Minister of Finance Sosten Gwengwe, which some circles have since rated as prohibitive.
Bone of contention on the gazetted tariffs, dated June 30 2023, are customs and duties on used motor vehicles.
But in an interview on Sunday, Gwengwe said the charges, which have been placed as duty on imported used vehicles, aim at suppressing demand for foreign exchange on the black market.
Gwengwe said motor vehicle importation continued to drain the country’s foreign exchange, with available figures showing that, last year alone, the country spent $110 million on importation of motor vehicles.
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“Depressing foreign exchange demand on the black market is the only way to avoid devaluation. Suppressing demand is better than outright restriction and all these are temporary measures,” Gwengwe said.
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In March this year, the government announced that the Malawi Revenue Authority (MRA) will stop charging duty based on the value of the car and other secondary factors and will start charging duty based on the car’s year of make and engine size.
According to the schedule released last week for example, a 2014 Diatsu Mira with engine size not exceeding 1,000 litres will be costing K3.3 million in duty.
Meanwhile, MRA has fallen short of explaining how it arrived at the figures.
Responding to a question during a press briefing in Blantyre Monday, MRA Deputy Commissioner responsible for facilitation Chimwemwe Kawalewale said the figures were arrived at after thorough consultations.
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“We seat on huge volumes of data based on the imports that are presented to customs and in determining the values, analysts looked at those figures and came up with the values as gazetted,” Kawalewale said.
He was however quick to say that the new tax regime will benefit importers as they will know the duty in advance.
But Institute of Chartered Accountants in Malawi (Icam) acting Chief Executive Officer Charles Chimpeni said in an interview on Sunday that the measure is likely to be reviewed as the people’s concerns are founded.
He, however, added that aside from the charges being exorbitant, the provision will help seal loopholes over valuation of imported cars.
“With the past system, people could collude to pay less duty after evaluation. But the government needs to revise the charges,” Chimpeni said.
Taxation expert Emmanuel Kaluluma said the government wants to discourage importation of second hand vehicles which have been draining forex.
“Budget is an annual exercise and if people have good arguments, they can put up a presentation so that the government can reconsider,” Kaluluma said.
Economics lecturer at the Malawi University of Business and Applied Sciences Betchani Tchereni said the charges were too high and would have a negative bearing on the economy.
“The minister has some chance to review the law and the midyear budget is coming soon,” Tchereni said.
Consumers Association of Malawi Executive Director John Kapito rated the tariffs as exorbitant.
