Tax stamps amid myths and realities
In life there are things one cannot avoid. It may take longer, but time still comes when one has to experience them. Taxes and death are among the unavoidable things.
Taxes are defined as mandatory contributions to State coffers levied through people’s earnings, company’ profits and goods and services in various forms such as income tax, corporate tax, value-added tax and indeed duty on imports.
Frederick the Great, an 18th Century Prussian king, said about taxes: “No government can exist without taxation. This money must necessarily be levied on the people; and the grand art consists of levying so as not to oppress.”
Taxes finance public projects and keep governments across the world running. In Malawi, the importance of taxes cannot be overemphasised as, ever since the revelations of Cashgate, the plunder of resources at Capital Hill through inflated invoices, dubious claims and payment for goods and services not delivered exposed in September 2013, the country has had to do without direct budget support from donors who frowned at the abuse.
It has not been easy though for the public tax collector, the Malawi Revenue Authority (MRA) as it has had to grapple with beating the tax revenue targets in a shrinking economy largely subdued by weather-induced disasters and global shocks, including the Covid-19 pandemic and strife in key regions that are home to some crucial imports such as fertiliser and petroleum.
To keep afloat, MRA in 2021 mooted the idea of tax stamps on selected products as one of the measures to boost revenue collection and at the same time, curb consumption of goods hazardous to health.
Dubbed Kalondola, the tax stamps are being implemented in two phases. Phase one covering cigarettes, alcoholic beverages such as beers, wines, spirits, whisky and opaque beer and non-alcoholic beverages came into effect on May 1 2024 while phase two was to roll out from July 1 targeting bottled water, carbonated soft drinks, drinks made from cereals, energy drinks, fermented sweet tea, lotion and glycerine.
Traders were given a three-month transition period to facilitate the selling or disposal of old stock or unstamped products produced or imported before the rollout date.
Many times, taxes are misunderstood as aptly put by the 19th Century English jurist Lord Bramwell who said: “Like mothers, taxes are often misunderstood, but seldom forgotten.”
The tax stamps have not been spared the confusion as many people believe they are a new tax, as it were. Just last week, a planned protest was called off after MRA met organisers and some small-scale traders and briefed them on how the tax stamps work.
The tax stamps are also used as a compliance tool to determine authenticity and quality of a product.
The reality, though, is that the tax stamps come at a cost as producers and importers will be buying them based on classification of products. For instance, tax stamps for bottled water, carbonated soft drinks and others will cost K12 each while for body lotion, glycerine and others will be K15 and K25 for beerspegged at. On the other hand, alcoholic spirits, whisky and other products will have a tax stamp worth K32 per bottle.
Naturally, the cost will be passed on to consumers.
To quote MRA head of corporate services Steve Kapoloma, for a bottle of whisky going at K85 000, adding K32 should not be a big deal.
It is worth noting that basic commodities such as salt, sugar and processed maize flour have been spared the tax stamps. The stamps are mostly on what are being described as “luxuries”, things one can do without or consumes out of a lifestyle such as cigarettes, whisky and bottled water.
Thus, besides the monetary gains, through the stamps, consumers stand to be protected from the consumption of hazardous or unhygienic products. In a way, the move is likely to boost the local manufacturing sector.
