Economic thinktank urges govt, Castel Malawi to reach agreement over taxes

An economic think tank; the Economists Association of Malawi has advised the government to reach an agreement with Castel Malawi Limited, manufacturers of alcoholic and non-alcoholic beverages, over taxes to prevent its closure.

Kalilombe: If Castel closes that would affect Malawi’s economy

President of the association Chiku Kalilombe said this after Castel Malawi officials said the brewery is on the verge of closure due to what they said continued decline in sales volume, turnover and heavy excise tax rate.

“The government should ensure that the taxes imposed on the company does not choke its operations. There can be a win-win situation agreement between the two,” said Kalilombe.

He said averting the closure of the company would save thousands of jobs.

“If the company closes, the number of jobless people would increase and that would affect the country’s economy,” he said.

Castel Malawi managing director Herve Milhade says excise tax rate on malt beer would be 60 per cent on ex-factory price (sales price).

He said the 60 per cent is higher for operations, saying the taxes have been increased by 22 per cent on clear beer compared to what they were paying at 90 per cent on production cost.

There was no immediate comment from the government or the Malawi Revenue Authority.

Tax expert Emmanuel Kaluluma said now that excise tax calculation is based on production cost and mark-up, how much one loses out depends on their profit margins.

He, however, said government ought to have done a proper analysis before effecting the new tax as “government too can lose out on tax revenues from the employees in the case of retrenchments”.

Castel Malawi is rated as one of the top 10 taxpayers in the country, contributing to the development of the economy for over 50 years and is also the number one taxpayers of import duties.

The company employs 1 284 people and has a business network of over 100 000 stakeholders, customers, suppliers, distributors contractors, locally and internationally.

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mpilu
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mpilu

khaziberg probably the best beer in the world.
zinani ndi maleka.
ma china ameneo ndi zomwe mmafuna.
cheap business

James Matipwili
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James Matipwili

Do you think they care? Refer to my comment in the next 3 years.

Silombela
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Silombela

Excise tax can be factored in the selling price in order to maintain the margins. So if quality of beer is good the operations will stay profitable. Illovo another South African company is also incurred losses yet they are fighting court case for externalising forex. For these foreign companies its just part of economic bullying tactics.

Concerned citizen
Guest

It is a plea, such rates of excise have not been applied to any Malawian business and it survives. I worked for a company that made Methylated spirits. Though the duty was charged on the production cost, by concensus, the cost was still too heavy. The company was closed down. Now what happens when a company closes down? Less people are employed. The tax base demishes. We export jobs. We lose expertise and the ability to produce them. We loose the chance to generate forex through the export of products. We loose the ability to produce substitutes for inputs. We… Read more »

Ota benga
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Ota benga

Part of the objective of excise tax is to limit/restrict the desirability of the goods in question by making them expensive. So the beneficiary either pays more to the govt or if he doesn’t want to pay more, simply avoid the products. So collecting taxes is simply a means to control the product and not necessarily the main goal of govt. Very simple, Unless of course you are castel md