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Malawi to compensate tariff cut for EU goods through more VAT

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Wednesday, 06 July 2011

Malawi to compensate tariff cut for EU goods through more VAT

The increase of taxes by government would continue to maximise domestic revenue ahead of abolition of international trade tariffs after endorsement of the proposed Free Trade Area (FTA) arrangements by African, European and Caribbean countries. Minister of Finance Ken Kandodo gave an indication that the phasing out of international trade tariffs would cause introduction of more Value Added Tax (VAT) as government would continue to rely on domestic revenue to sustain the non-donor funded recurrent budget. In his wind up speech of budget debate in Parliament Kandodo said once the regional integration in the Sadc, Comesa and East Africa Community (EAC) had taken place and most trade taxes phased out countries like Malawi would rely more on VAT. “We will, therefore, need to minimise exemptions in the Vat regime,” Kandodo said. Malawi’s major trade partner on the continent is South Africa and the FTAs, which include abolition of trade tariffs and trade quotas, will reduce revenues collected from imports. […] Apart from the African free trade area proposal, the European Union is also pushing for African Caribbean Partnership (ACP) countries signing of the new ACP-EU new trade agreement which also provides for free trade area among member countries.

Source: The Times