Businesses caution Treasury on new tax measures

The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says while the introduction of surcharge on some imported products may appear attractive to concerned industries, the policy is likely to with consequences.

MCCCI chief executive officer Chancellor Kaferapanjira observed that surcharge on imported products that have local substitutes such as vegetables, fruits, sugar, cooking oil, cement may encourage growth of local industries, it could have negative impacts on prices and export market promotion.

He said that as the prices of imported products have increased, the prices of domestically produced substitutes will tend to adjust to the prices of these imported products over time, to capture the potentially increased margins.

This, he said, could end up with firms focusing on producing for the local market rather than making efforts to consider export markets also.

He said: “Government has no mechanism of ensuring that the prices of local commodities remain lower than those of imports. This has been the trend in nearly all cases where government has intervened in this fashion. Eventually, therefore, the impact of the ‘surcharge’ will fall on local consumers who will now have to pay higher. “As the local producers will eventually be charging prices that have an increased margin after adjusting prices of their commodities to match those of imports, these producers will surely see no reason to test export markets that are riddled with all kinds of risks. The end result will be that the country’s policies will be self-defeating; instead promoting export orientation, it is production for the domestic market that will be encouraged.”

Minister of Finance, Economic Planning and Development Joseph Mwanamvekha told Parliament last week that the introduction of surcharge on imported products that have local substitutes aims at encouraging growth of local industries, save foreign exchange, and promote industrialisation.

The development comes three years after President Peter Mutharika launched the Buy Malawi Strategy (BMS) on March 18 2016 in Lilongwe to build competitiveness of enterprises, leading to greater economic growth and increased welfare for all Malawian citizens.

Government developed the BMS to reduce the ballooning import bill and close the country’s wide trade deficit in the short to medium-term.

Economics professor at University of Malawi’s Chancellor College, Ben Kaluwa, earlier called for aggressiveness to ensure that the country’s products compete with imported goods.