September 7, 2010 - Blantyre, Malawi - In a statement published Wednesday Lloyd Muhara, Commissioner General of the Malawi Revenue Authority (MRA) - Malawi's official tax collectors - said from 1 September, 2010 all manufacturers, importers and distributors of cigarettes must obtain a licence from the tax body that will indicate that they have paid duty or tax on their cigarettes.
Muhara said this was in line with the new Customs and Excise Amendment Act that Finance Minister Ken Kandodo announced in July this year, when he presented the 2010/11 national budget. 'This means that MRA has granted the business community a grace period of three months to dispose off their existing stocks after which cigarettes without the prescribed stamps will be impounded and destroyed,' said Malawi chief tax man.
The tobacco industry is big in Malawi, with the southern African country being the largest producer of burley tobacco.MRA spokesman Steve Kapoloma told PANA (Pan African News Agency) that this may not necessarily translate into increases in prices of cigarettes. 'In fact, this tax is beneficial to the manufacturers, importers and distributors as they were not able to sell to their optimum because of illegal smuggled cigarettes,' he said.
Malawi, a country almost entirely dependent on tobacco for government revenue, employment and development financing. After the government, the tobacco industry is the second largest employer. It is responsible for 75 per cent of foreign earnings and contributes 10 per cent of the country's gross domestic product. The crop has been so eagerly embraced by farmers in the region that they call it the "golden leaf." ('Golden leaf' loses its lustre International tobacco controls spurring production shifts by Naututu Okhoya and Gumisai Mutume, Africa Renewal, Vol.18 #3 (October 2004), page 4)
Malawi - how can this country survive without tobacco??
At least 80 percent of Malawians directly or indirectly depend on the industry that contributes to at least 23 percent of all tax collections and 30 percent of GDP.
Kapoloma said the new regulations would make it illegal for anyone to be found peddling cigarettes without the MRA-issued stickers. He said this would mean from Wednesday Malawian border authorities would no longer allow entry of cigarettes without the MRA stickers.
'This will automatically mean a decrease in smuggled cigarettes and if we decrease the sale in cheap smuggled cigarettes the gap will be filled by the legitimate manufactures, importers and distributors,' he said, adding: 'So since they will be able to sell more than they are doing now there will be no need to increase prices.'
But, while welcoming the introduction of the tax stamps, an official of the British American Tobacco (BAT) said it would definitely come at a cost. 'There will definitely be a cost for this but we won't bear it; we will pass it to the consumers,' said the official who did not want to be identified because he is not authorised to speak to the media. 'There will definitely be a slight increase in retail prices.'
However, the official said the tax stamps were a welcome development because, if enforced properly, it would curb the influx of smuggled cigarettes. 'The challenge will be enforcement because if they police and enforce this properly it will curb illicit cigarettes,' he said. 'We've been crying for this for a long time.'
Reference: Malawi: Puffing more expensive in Malawi as taxman calls, AfriquenLigne.com, 9/2/2010.
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