FND to petition Parliament on July 26 over “punitive, restrictive and abhorring” duty on imported second hand cars

* This policy is retrogressive and pushing a lot of people into poverty—FND

* HRDC gives the government a 7-day ultimatum to engage with different stakeholders and address the issue

* MRA contends that the specific tax — which will be implemented from July 15 — has relinquished powers it had

* And gives it to motor vehicle importers which they said is good in as far as determination of duty is concerned

By Duncan Mlanjira, Maravi Express & Tikondane Vega, MANA

Forum for National Development (FND) is appealing to all concerned Malawians to join it on July 26 when it will present a petition to Malawi National Assembly in order for august House to force the repeal or reduction in terms of high duty for second hand motor vehicles.

In the same breath, Malawi Human Rights Defenders Coalition (HRDC) also raises its voice against the government’s new vehicle import duty, describing it as “unrealistic and punitive taxes on the citizens — hindering economic growth and impeding the rights of individuals to engage in economic activities”.

HRDC gives the government a 7-day ultimatum to engage with different stakeholders and address the issue and if it fails to do so, after the said 7 days, HRDC will tell Malawians the next course of action.

However, at a press briefing on Monday, Malawi Revenue Authority (MRA) said the specific tax — which will be implemented from July 15 — has relinquished powers that the collection body had and give it to motor vehicle importers which they said is good in as far as determination of duty is concerned.

Deputy Commissioner responsible for facilitation under Customs and Excise, Chimwemwe Kawalewale said what MRA has done is just to change a way of determining duty of cars.

But in a public notice, FND national coordinator, Fryson Chodzi says all Malawians and those that will be affected by this law, should make a stand on July 26 by converging at Parliament to peacefully petition the legislators, adding that full details of the action will be communicated in due course.

FND says they are shocked by the recently gazetted punitive, restrictive and abhorring CustomS and Excise (Tariff) (Amendment) (No.4) Order, 2023 which Minister of Finance & Economic Affairs, Sosten Gwengwe has ordered.

It says it is “disgusted with the level of arrogance demonstrated by the MRA in an attempt to justify the unjustified published duty cost for second hand motor vehicles”, saying this was of concern that “this policy is retrogressive and pushing a lot of people into poverty especially that Malawi has no public transport system”.

FND is also “worried that the new gazetted prices for second hand motor vehicles entails that honest civil servants, teachers, nurses, workers, soldiers, police officers and business people will not afford to buy a motor vehicle”.

Thus intending to petition Parliament to repeal or reduce the tariff measures in while HRDC says the government’s decision on this new tax regime lacks comprehensive consultation.

HRDC is urging the government “to engage a wide range of stakeholders to gather diverse perspectives before implementing such policies that significantly impact the citizens negatively on their economic welfare”.

“The concerning aspect of this law is that it was passed through Parliament without proper consideration of its actual impact on ordinary citizens. Members of Parliament, who are exempt from paying taxes on their vehicles, do not experience the burden of these punitive taxes, which highlights the inequality within the system.

“Therefore, HRDC advocates for the abolition of duty-free privileges for public officers and Members of Parliament.”

Signed by national chairperson, Gift Trapence and his management team, the petition further says “if the government claims that it is implementing these measures to save forex, it should also take comprehensive actions to combat the real culprits who externalise forex”.

“Additionally, the government should implement austerity measures on the travel expenses of public officers, including external presidential travel, in order to save forex. Furthermore, the government should consider banning the use and purchase of expensive vehicles by public officers that unnecessarily drain forex.

“Government should not use unjust taxes to punish Malawians. We demand accountability and transparency in the utilization of tax revenue. Before increasing taxes, time to time, government should be able to provide a detailed account on how the collected funds have been utilised over the years.

“The timing of the tax increase, during a period of economic hardship for the masses, displays the insensitivity of the government towards the suffering of ordinary Malawians. We call upon the government to reconsider this decision and prioritize the well-being and economic stability of our citizens.”

HRDC maintained that “paying taxes should not be punitive to the citizens or stifle the growth of businesses”, adding that they “must be fair and reasonable — allowing citizens and enterprises to thrive and contribute to the country’s economic progress”.

“The imposition of punitive taxes restricts the rights of citizens to engage in economic activities and inhibits the growth of businesses. Tax administration should be fair, reflecting the reality of the country’s economy and the enjoyment of economic rights by the citizenry.

“Taxes should be designed in a manner that considers the economic situation and the ability of individuals to pay, ensuring a just distribution of the tax burden.

“Malawians are already burdened with excessive taxation. Our citizens are among the most heavily taxed individuals in the world. The introduction of additional unrealistic taxes on vehicle importation exacerbates the financial strain on the populace, leading to further economic hardships.

“HRDC believes that taxes, when used effectively, can be instrumental in uplifting the impoverished. Rather than imposing punitive taxes, we advocate for realistic taxes that create an environment conducive to improving the welfare of citizens and facilitating their transition out of abject poverty.

“The outcry against the taxed levied on imported vehicles is justifiable. The government must reevaluate the formula used to determine these taxes, as it fails to reflect the actual market value of imported vehicles. Under the new calculation regime, the taxes imposed far exceed the cost of the car itself.

“The current tax regime is inhibiting citizens from importing and owning vehicles, due to the prohibitive tax structure. This severely limits mobility and economic opportunities for ordinary Malawians, hindering their ability to engage in productive activities.”

At the press briefing, which was in response to media platforms which were awash of the new tax regime, Kawalewale said: “All along MRA has been using an ad valorem tax whose amount is based on the value of a transaction or of a property,” he said. “The duty was typically imposed at the time of a transaction which caused a lot of problems.

“This led to people saying the tax collecting body is over charging duty because it is different with what they planned for. Now, Parliament approved other tax measures like specific tax which has put fixed duty to cars according to their size, type and year of make, among others.

“This has given power to car buyers because the new measures provide predictability of duty to be paid and will not be charged extra amount in all borders.”

Kawalewale gave an example of 2022-2023 financial year, in which MRA headquarters received a total of 290 duty appeal cases from different borders and out of this, 254 were appeals from used vehicle buyers which represents 87.6%.

“You can see that it was important to have specific duty to avoid misunderstandings between MRA and customers as this was portraying bad image to the institution. Usually, specific tax is given to items or goods that are difficult to determine its value like used cars and second-hand clothes”.

Head of Corporate Affairs, Steven Kapoloma said the new tax was driven by importers themselves and that MRA is just administering it after government followed all procedures including passing through parliament.

Kapoloma said all along there has been challenges when it comes to calculation of duty in all used cars hence importers proposed the idea of having specific tax saying the new measure is in line with international standards.

“This means there will be no frequent disputes when it comes to clearing of vehicles. On several occasions people have been forging documents to reduce the price of vehicles so that duty can also be low.

“The matter is history now. No one will cheat his or her friend that can do something to reduce duty at the border. MRA was surprised that similar cars were being charged different duties because someone is using fake documents.

“Now cars have been put in bands meaning when buying, everyone will know the duty to be paid. The new measure is easy to administer because the value is prescribed. This will give proper planning for all car buyers.”

Kapoloma said during 2021-2022, 2022-2023 and 2023-2024 budget consultations, many people including importers suggested for specific tax which they said would reduce misunderstandings when it comes to vehicle clearance at the border.

He said the new measure is fair and has ended corruption when it comes to clearance since it has provided uniformity on duty issues.