Importers of second-hand motor vehicles have threatened to go to court to challenge a Malawi Revenue Authority (MRA) decision to introduce fixed duty on imported vehicles.

In an interview yesterday, Car Dealers Association of Malawi member Amon M’bwana said they were not consulted on the values determined and said if MRA does not withdraw the new tax order, they will seek court redress.

Kawalewale (L) briefs journalists about the new fixed duty order

He said: “I don’t know what was their basis and why they came up with the exorbitant prices but, it is terrible not only for those trading in the business, but even consumers who would want to use a bank loan to import the vehicle.

“We need to revisit these issues and come up with a concrete solution. Otherwise, we will go to court for an injunction.”

M’bwana cited a 2011 Daihatsu Mira with an engine capacity of 999cc whose duty MRA has pegged at K3 million using the fixed model against the K1.7 million that importers would normally pay.

The fixed rates target second-hand motor vehicles manufactured between 2001 and 2020. They are expected to roll out on July 15 2023.

For motor vehicles that are zero to three years old and those older than 23 years, an Ad valorem will be used where duty will be charged according to value.

But during a news conference in Blantyre yesterday, MRA deputy commissioner facilitation, customs and excise Chimwemwe Kawalewale said the taxes will help address valuation disputes and restrict importation of older second hand vehicles.

He said the new taxes also follow requests from importers of used motor vehicles to the Ministry of Finance and Economic Affairs and were duly presented and adopted in Parliament during the 2023/24 Budget Meeting.

Kawalewale said in coming up with the fixed tax schedule, the tax collector took into account preferential trade agreements contrary to speculation that following the gazette, prices of motor vehicles have increased, he said the move has created predictability and transparency on pricing for the importer.

“Government felt it was necessary to migrate to this model to afford importers of used vehicles a fair playground and predictability in collection of customs duties,” he said.

MRA head of corporate affairs Steven Kapoloma said the move will help level the playing field because regardless of the border post, everyone will now know the amount to be paid for a specific vehicle.

For used motor vehicles not in the schedule, one needs to submit an application to MRA Commissioner General where in determining the tax payable on motor vehicles, classification of the vehicle shall be made by considering make, model, year of manufacture, cylinder capacity and body type.

Under gazetted Customs and Excise Tariffs Amendment 2023, signed by Minister of Finance and Economic Affairs Sosten Gwengwe, where a used motor vehicle is damaged in transit, the Commissioner General shall determine the specific tax payable based on the severity of the damage.

However, Kawalewale argued that in the same document, for instance, a Toyota Corolla (2000 to 2005) valued at $5 000, one would be required to pay K4.1 million using the fixed model and not K6 million one would normally pay.

He said for a 2020 Toyota Corolla valued at $15 000, at a fixed rate, one would pay K9.5 million, above the K7.9 million one would normally pay using the current system.

Malawi Confederation of Chambers of Commerce and Industry president Lekani Katandula said while he does not have enough information to comment on fairness of the gazetted tax levels, he fully supported the intention of simplifying the tax code and making it more predictable.

In an interview yesterday, Gwengwe said MRA needed to engage dealers and hear their grievances before implementing the new measures.

“I have asked the Commissioner General to invite the concerned parties, even if it means shifting the implementation date to August 1 2023,” he said.

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