Trade pacts choke revenue collection

Post was last updated: January 11, 2016

Regional trade agreements under Sadc and Comesa, especially those that allow entry of goods duty free, are negatively impacting on the country’s revenue collection.

Malawi has in recent years signed several trade agreements with Sadc and Comesa member states as a way of facilitating trade within the region.

Malawi Revenue Authority (MRA), however, notes that while the trade agreements are good for the development of the country, they are also having an effect on revenue collection.

MRA Commissioner General Tom Malata said the tariff phase down with South Africa had an impact on revenue collection.

“Trade facilitation is one of the regional issues at the moment. The Sadc and Comesa agreements look at facilitating border entries and reducing taxes within the member states.

“Malawi signed an agreement with South Africa which has had a huge impact on tax collection but has a good impact on development of the country such that goods from South Africa, sadc and Comesa come in duty free. On the trade part it is good trade facilitation but it has an impact on the revenue part,” he said.

He further said the volatility of the kwacha last year also had an impact on the revenue collection.

“The volatility of the kwacha during the year saw a decline in importation of dutiable goods due to volatile exchange rate and due to increased importations of farm inputs. This affected small and medium scale business people who ply their trade across the borders.

“Unstable prices of agricultural produce at the auction floors i.e. tobacco also had an effect. But our opinion is that once the economy is back on track, which will be shortly, we will see the traders back in their usual business,” said Malata.

He also highlighted smuggling and tax evasion as other major challenges facing the tax collection body.

Malata said the most affected border posts are Songwe, Mulanje, Mchinji and Ntcheu.

He said items mostly smuggled include, cigarettes, cement, sugar, batteries and cooking oil.

“As MRA we have teams in these posts that are monitoring the trends and working very hard to curb the problem. We are also appealing to the general public especially chiefs in areas close to the borders to report any suspicious activities.

“Increased smuggling of these goods will have a negative impact on our economy. This might lead to closure big companies like Illovo and Portland who are the largest employers,” said Malata.

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