It is reported that in the neighbouring Mozambique, the value added tax (VAT) is not levied on some of the products making them cheaper compared to those from Malawi.
While this is a boon for traders, local manufacturers are hit hard.
Local Manufacturers of cooking oil, wheat flour, carbonated drinks, among others in Malawi are a frustrated lot . It is reported that in neighbouring Mozambique, value-added tax (VAT) is not levied on some of the products making them cheaper compared to those from Malawi. While this is a boon for traders, local manufacturers are hit hard.
The Government of Malawi introduced VAT on wheat flour in 2016 and in 2019, the same tax on cooking oil in 2020/21 National Budget valued. Venkatesh Rao, general manager of Bakhresa Malawi Limited, one of the local wheat manufacturers, said with the introduction of VAT the capacity utilisation of wheat mills fell to below 25 percent leading to a rise in smuggling. The VAT has made the local wheat millers unable to compete with cheap smuggled flour from Mozambique and Tanzania where there is no VAT imposed.
Observers have pointed out that lack of a level playing field will dissuade long-term investors. Additionally, it is also leading to job losses as the companies are resorting to job cuts with the erosion in their revenue.
