Government Faces Mounting Pressure to Revoke Newly Introduced Fixed Duty on Imported Vehicles
Subtitle: Public Outrage and Calls for Repeal Grow as Controversial Tax Measures Spark Criticism and Legal Threats
The Malawian government is under increasing pressure to reverse its decision on the recently implemented fixed duty on imported vehicles, which has been described as punitive, unrealistic, and restrictive. The new tax order has ignited public anger, with various organizations and citizens demanding its immediate repeal.
The Human Rights Defenders Coalition (HRDC) has given the government a seven-day ultimatum to overturn the tax, while the Forum for National Development (FND) and other civil society organizations have threatened to petition Parliament for its repeal. The Centre for Democracy and Economic Development Initiatives (Cdedi) has also called on Finance Minister Sosten Gwengwe to provide justification for the new tax.
Importers of second-hand motor vehicles, represented by the Car Dealers Association of Malawi, have warned that they will take legal action against the government, citing a lack of consultation on the determined vehicle values. The fixed tax rates specifically target second-hand motor vehicles manufactured between 2001 and 2020, set to be implemented on July 15, 2023.
Under the new tax regime, motor vehicles aged zero to three years and those older than 23 years will be subject to an Ad valorem tax, charged based on their value. However, concerns have been raised regarding the lack of comprehensive consultation in the decision-making process and the failure of the tax rates to reflect the actual market value of imported vehicles.
The HRDC has stressed the importance of tax justice to create a conducive environment for the economic welfare of Malawians. The coalition has called on the government to reconsider the formula used to determine the taxes, as the current structure significantly exceeds the cost of the vehicles themselves. They argue that such a tax regime inhibits citizens from importing and owning vehicles, hindering economic growth and the enjoyment of economic rights.
The FND has expressed shock and disgust at the punitive and restrictive nature of the new tax, stating that it pushes many people into poverty, particularly in a country with no public transport system. The organization plans to petition Parliament on July 26, 2023, to demand the repeal or reduction of the duty.
The Centre for Democracy and Economic Development Initiatives (Cdedi) has challenged the government to provide evidence of its claims that car imports are draining foreign exchange. Meanwhile, the Consumers Association of Malawi has criticized the tax as a means of punishing small-scale entrepreneurs and businesses.
As an example, the new tax regime has set the duty for a 2011 Daihatsu Mira with an engine capacity of 999cc at K3 million, using the fixed model, compared to the K1.7 million that importers would normally pay.
The government now faces the challenge of addressing the growing discontent and finding a solution that balances revenue generation with the concerns of citizens and businesses impacted by the new tax measures.