Ministry of Trade and Industry says government has removed the 16.5 percent value added tax (VAT) on cooking oil as one of its interventions towards reducing rising prices of cooking oil.

Addressing the press in Lilongwe yesterday, Minister of Trade and Industry Mark Katsonga Phiri said government expects cooking oil prices to go down by at least 16.5 percent next month following the removal of the VAT.

Said the minister: “Government has given up 100 percent of its income on cooking oil, which is a lot of money because we were collecting over K5 billion from oil alone.

Katsonga Phiri: What sacrifice are they making?

“We are, therefore, asking the cooking oil industry what sacrifice they are making to reciprocate what government has done. If they could chop their profit margin on cooking oil so that the price reduction can go further down to even 20 percent, for instance, considering that government has done its part, we will appreciate that and so will the consumers.”

Katsonga Phiri said this is a short-term intervention and that government is looking at other ways to further reduce cooking oil prices.

The minister said government has also opened importation of cooking oil to the public to encourage competition between local producers and importers so that the prices can be competitive.

But in an interview, one of the industry players who spoke on condition of anonymity said they will reduce the cooking oil prices by a small margin.

“We are unable to claim input VAT on the raw materials we purchase, and that will be an additional cost to customers. But surely, we will reduce the price of cooking oil in line with the VAT removal on cooking oil,” said the source.

However, a development researcher and analyst Misonzi Gundo attributed the high cooking oil prices to the rising cost of crude oil on the international market.

 In a written response, he said local cooking oil producers initially found it cheaper to refine crude oil than produce the oil from cotton seeds, sunflower, ground nuts and soya.

Said Gundo: “But they realised that it was cheaper to buy crude oil from South American and Asian mass producers. Those external producers were able to sell cheaply because to them, even if they made so little per unit, they made more by selling a lot of units.”

He observed that the cooking oil producers are serving their own interests and that they raised prices to force the government to remove VAT, which it eventually did, but are reluctant to transfer the benefits to the consumer.

According to Gundo, the manufacturers hope that the government will relent and remove even some corporate taxes so that they can make more profits and cover the increasing costs of crude oil.

Minister of Finance and Economic Affairs Sosten Gwengwe announced the removal of 16.5 percent VAT on cooking oil in his 2022/23 National Budget Statement. The move followed a long battle between government and cooking oil producers over prices.

 The producers argued that introduction of VAT contributed to the skyrocketing of cooking oil prices while government said that their claim had no basis because they were claiming input VAT, as such, consumers were supposed to be spared.

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