Treasury to review industrial rebate scheme—official

Treasury says its plans to review the industrial rebate scheme, a measure introduced by government to boost the manufacturing sector, by removing import value added tax (VAT) on raw materials.

According to the Malawi Revenue Authority (MRA), the general pattern of the industrial rebate scheme entails that various types of industries are approved for rebate and specified materials for use in particular industry maybe imported, or delivered from an excise factory at reduced rates of duty.

Ministry of Finance, Economic Planning and Development director of policy and revenue Ken Matupa said it is high time government revised the scheme, which has been in place for close to 20 years.

“Under the scheme, there is a set criteria used to ascertain whether a sector enjoys benefits enshrined under that provision or not, the benchmark of which is 20 percent value addition and a valid taxpayer’s certificate.

“Our counterparts within the region have a benchmark of 30 percent. But an ambitious value addition of 20 percent means our commodities cannot be traded within the region. Maybe this is the time to look at what we can do beyond the international market while supporting the local market,” he said.

The pronouncement to review the scheme followed concerns from a representative of iron sheet manufacturing companies, Vijay Kotecha, proprietor of Steelco, who said the removal of iron sheets raw materials from the scheme threatens the local industry as imported iron sheets undercut their pricing.

“For the past 25 years, we have enjoyed a conducive environment for manufacturing roofing sheets and rebate for the raw materials which enabled us to manufacture and distribute iron sheets at an affordable price to the rural people.

“Early this year, we were surprised to learn that MRA had removed industrial rebate on roofing sheet and that we were supposed to pay 10 percent import duty. The removal of which will make locally produced iron sheets more expensive to Malawians and hamper our efforts to contribute to decent housing,” he said during a Pre-Budget Consultations meeting in Blantyre last week.

MRA commissioner general Tom Malata said while the industrial rebate is a good scheme and all manufacturer would want to be included, as a policy implementation, the tax collector is guided by law to implement government policy.

Malawi Confederation of Chambers of Commerce and Industry (MCCCI) private and public dialogue manager Hope Chavula said there is need to review the scheme by considering increasing validity period from one year to three to five years, but with a period of monitoring by MRA as well as review the list of products included on the scheme.