Malawi Energy Regulatory Authority (Mera) says it will this month draw K150 million from the Price Stabilisation Fund (PSF) to pay for carbon tax.
The development comes as Treasury in the 2020/21 National Budget changed carbon tax payment from the point of renewal of certificate of fitness (CoF) to the fuel pump levied at K5 per litre.
In an interview on Saturday, Mera chief executive officer Collins Magalasi said they commenced carbon tax collection on June 12 when the arrangement was announced in Parliament.
Magalasi said from 30 million litres of fuel expected to be sold this month, carbon tax would amount to K150 million, which will be drawn from the PSF.
He said: “We needed to use the fuel stabilisation fund because if we raised fuel prices, we were going to shock the economy as it meant raising fuel prices mid-month.
“What it means is that carbon tax will become part of the fuel pricing formula. In the event that fuel stabilisation fund dwindles, we will adjust fuel prices not because of the carbon tax but to ensure that we have enough stabilisation fund.”
Consumers Association of Malawi (Cama) executive director John Kapito said last week that by transferring the tax to the petrol pump, Treasury has broadened the tax base and ensured that everyone, including those without cars, are paying the tax.
“Governments have an obligation to provide social services to their people and the only way is through the introduction and continuous collection of taxes,” he said.
On his part, tax expert Emmanuel Kaluluma said those who already paid their annual carbon tax through CoF, will lose out and pay more on the tax.
“We have a huge challenge in terms of mobilisation of resources; hence, government is looking at how it can speed up revenue collection and also bringing in the aspect of time value for money,” said Kaluluma, a senior tax consultant at E.K. Tax Consultancy.
Mera also collects rural electrification levy, road levy, energy regulation levy, Malawi Bureau of Standards and road traffic levy through the pump.