ActionAid Malawi mourn over tax on cooking oil, betting-fear over 1000 job losses

The introduction of a 20 percent withholding tax on winnings from betting and gambling transactions including lotteries, will make the gaming industry exit due to the “punitive” tax–leading to loss of 1000 direct and indirect jobs.

Treasury imposed VAT on refined cooking oil
Assan Golowa-Phiri  ActionAid Malawi director: Taxes must speak to the needs of communities
ActionAid Malawi has said this in its budget tax revenue policy analysis which was presented to members of the Budget and Finance Committee of Parliament in the Capital Lilongwe.
The organization also says the introduction of a standard Value 16.5 Added Tax on cooking oil will hurt small scale producers and consumers and affect revenue generation.
In his presentation of the proposed 2020/2021 national budget last month, Finance Minister, Felix Mlusu–outlined these two tax measures and several others in the hope of increasing the revenue base to finance the budget.
And ActionAid has, in the first place, agreed that the two tax policies would indeed increase the revenue base–considering the value of Soya bean market alone estimated at 30 million dollars and growing participation of Malawians in betting.
However, the organization says if government wants to increase the revenue base, it needs to impose more taxes on the wealthiest people or corporates and not milk the poor such as gamblers and local cooking oil producers
Speaking in an interview with Nyasa Times after the analysis had been presented, Executive Director for ActionAid Malawi, Assan Golowa, said members of the Budget and Finance Committee needed to know and discuss these concerns surrounding tax policies so that they lobby relevant authorities to take appropriate action.
“Our position is that taxes should be very progressive. Taxes must speak to the needs of the communities. Taxes must deliver on the development activities in line with the aspirations of the people.
“We have a feeling that the country continues to register a fiscal gap. There is less and less revenue being generated while our needs continue to grow. With that, there are disparities in terms of allocation of tax revenue to different sectors of society. The women and youths are the most affected,” said Golowa.
According to the ActionAid analysis, the VAT on cooking oil–which is a consuption tax–will lead to increased pricing of the product and make the consumer suffer the most.
The analysis, quoting the cooking oil producers that have ganged up against the new tax measure include Capital Oil Refining Industries Limited, Sunseed Oil Limited, Agri Value Chain Limited, Mount Meru Petroleum Limited, and MOTI Oils Mills Limited operating under an umbrella body called Edible Cooking Oil Association of Malawi (Ecoam), adds that the tax will affect small scale producers if it is not pushed to the buyers.
“Before this tax, the oil industry registered remarkable benefits to the economy. The growth of Soy Bean shot up in 2017 from 137,000 metric tonnes to 250,000 tonnes.

“This resulted in increased gains by smallholder farmers as demand for the bean increased, market value estimated at 30 million dollars. The industry saved forex due to local production of crude Soy Bean oil,” further reads the analysis in part.

The local press quoted Mekelina Mtalimanja, 36, who survives on selling cooking oil at the populous Nsungwi market in the densely populated Area 25 in Lilongwe, saying  her livelihood could be hanging by a thread, should parliament pass a 2020/21 budget which has proposed a standard Value 16.5 Added Tax on cooking oil.

Okapanga choncho wo Chakwera ndeku otilakwira zedi.Ndithudi otipweteka [If Chakwera government goes ahead to implement such a tax measure, that will spell doom to our business.We will be squeezed out of this business for sure,” she complained in a typical and deep chewa toungue in quotes reported by Business Review.

On betting, the analysis, quoting the Malawi Gaming Association, says the imposed tax is making operators of gambling to contemplate shelving down or exiting the gaming industry which would result to loss of 1000 direct and indirect jobs.
However, when he presented the budget statement, Mlusu had justified government’s decision to introduce these taxes especially on refined cooking oil.
He told Parliament:’”Previously, refined cooking oil was VAT exempt and manufacturers were not able to claim tax refunds on their input VAT. This measure will now allow manufacturers to claim input VAT.
“Local manufacturers of refined cooking oil will continue to benefit under the Industrial Rebate Scheme where raw materials are imported without payment of duty.
“In addition, under the Surcharge Tariff regime, the local manufacturers are protected
from adverse competition. In this regard, arbitrary price increases especially by local manufacturers reflecting the full VAT adjustment on the refined cooking oil, is not expected.
Members of Parliament (MPs) are expected to wind up debate on the 2020/2021 budget statement this week and ActionAid Malawi believes this was an opportune time to engage them on these concerns.
And taking her turn, Chairperson of the Budget and Finance Committee, Gladys Ganda, assured ActionAid that her committee would present these issues to the Minister of Finance, adding that she could have loved if these concerns were availed before the budget was even presented.
However, Ganda said she thinks the tax on cooking oil and betting is necessary for now if government is to really increase the revenue base to finance a number of sectors as advocated by ActionAid.
“The tax on cooking oil cuts across the board. After all, we want government to generate more money. We want government to meet the revenue target to finance the budget.
The fear of closure of shop is a mere scapegoat by these betting companies so that they do not pay tax. They must pay, the money will grow the economy,” she said.
It is feared that the re-introduction of Vat will imply that the price of cooking oil will have to increase now on the local market, thereby triggering huge smuggling of refined cooking oil from Mozambique, Zambia and Zimbabwe into the country through the long stretch of porous border that cannot easily be policed by Malawi.

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National CEO
National CEO
8 months ago

I pay taxes, so these big companies do not pay the taxes?

Last edited 8 months ago by National CEO
Libra
Libra
8 months ago

Ahhh please! Why bothering imposing taxes when you are failing to conclude corruption cases where billions have been swindled…return this money to government coffers first..more taxes just for them to be swindled???

Sam bojo
Sam bojo
8 months ago

This will kill cooking oil industries as it is they are already struggling with sales and dollar not stable these Mwenyes will push the tax forward to the consumers poor Malawians will suffer is this the change we asked for tonse government failing to run the country none of the culprits have been brought to justice walking freely enjoying lavishing life style

J G Simpsons
J G Simpsons
8 months ago
Reply to  Sam bojo

Who said that Cooking Oil Companies are Struggling have you seen there Sales Volumes of Big Cooking Companies
DO YOUR HOME WORKS CORRECT DEAR

Ulendo wa ku Canaan
Ulendo wa ku Canaan
8 months ago

Thanks to our leaders. cooking oil is a luxury and a healthy hazzard. so many people are sick because of the cooking oil.You may also consider introducing heavy taxes on Sugar.. another killer

J G Simpsons
J G Simpsons
8 months ago

Very Correct for your information most of the Asian Communities do not consume locally produced cooking oil they Consume South African Cooking Oil and for Sure Cooking Oil Produced in Malawi is not of the International standard or even SADC Standards that’s why it is never Exported

J G Simpsons
J G Simpsons
8 months ago

Malawi Should introduce VAT on Cooking Oil as all the Big Manufacturers are making More Money if they are not paying VAT since 2017 MRA has Lost Billions in Revenue from Cooking Oil VAT How many Cooking Oil Manufacturer are in Real Terms Manufacturing Cooking oil from Local Soya Beans or other Seeds 90% of Cooking Oil in Malawi is Imported and Soya Bean Oil + Palm Oil and Malawi is paying Forex against that Imports If MRA can do an Analysis from the Date VAT was withdrawn on Cooking Oil MRA has lost Billions of Kwacha in Taxes VAT… Read more »

Kondwani Kelvin
Kondwani Kelvin
8 months ago

Malawi Govt Made a Big Mistake by Removing the VAT of 16.50% on Cooking Oil as Must of the Big Manufacturers Made hell of Money from that and Not Even Reduced the Price of the Cooking Oil in the Market MRA has lost Billions of Kwacha in Taxes of VAT and it should be Re introduced Back into System No other Country in SADC has Exempted Cooking Oil from Taxes it is Sad that Malawi as a poor country is Exepmting Taxes on Cooking Oil which is 80% Imported in Country Malawi Govt Should Re Introduce the VAT on cooking… Read more »

Gideon Limbe
Gideon Limbe
8 months ago

This tax will escalate the demand for cooking oil from across the boarder. Malawi is surrounded by countries where vegetable oil is easier produced. Tanzania, Zambia and Mozambique have a distinct comparative advantage in this product and it’s counter productive to introduce such a barrier when Malawi should be facilitating local production. It serves as import promotion. The vegetable oil value chains is very directly linked to livestock production as byproducts from oil extraction, seed cake, makes an important raw material in feed manufacturing. If we import or smuggle oil from across the boarder we will put our livestock industry… Read more »

Wilkork
Wilkork
8 months ago

Imposing tax on gambling it’s a good move, coz it is something that we can live without, but on cooking oil, then it’s a problem coz these companies will be buying our soya bean at a very low price which is not good for us farmers we will cry foul

J G Simpsons
J G Simpsons
8 months ago
Reply to  Wilkork

Hold on to the Soya Beans Cooking Oil Manufacturers will Definitely Buy from you only and Do Not try to Sale Below the Govt Declared Farm Gate Price other wise you will Loose

Gideon Limbe
Gideon Limbe
8 months ago

This tax will w

Gugu
Gugu
8 months ago

the tax on cooking oil needs rethinking. Lots are living off chiwaya business

J G Simpsons
J G Simpsons
8 months ago
Reply to  Gugu

Even Two years Back also VAT was on Cooking Oil Dear and that Time also Busineas in Cooking Oil was very good and People were doing Chiwaya Busineas and SME were also doing good Business in Malawi

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