Milk producers say the standard value added tax (VAT) rate of 16.5 percent levied on milk introduced in the 2016/17 fiscal year is killing the dairy business.
In a move to widen the tax base, government introduced the standard VAT rate on a number of products, including milk, which were currently zero-rated or exempted.
Minister of Finance, Economic Planning and Development Goodall Gondwe said the measure will, among others, expand the tax base, restore the integrity of the tax system by removing distortions that favour some products against others, and remove the causes of high refund bills that Malawi Revenue Authority (MRA) fails to honour.
In an interview, Malawi Milk Producers Association national director Henry Chagunda said the standard VAT is affecting the growth of dairy business, which poses a threat to some producers closing shop.
He said the VAT has resulted in Malawians shunning dairy products and the biggest losers are smallholder dairy farmers who have been forced to reduce prices of milk considerably so that it can be bought by processors.
Chagona said Malawi is one of the few countries in Southern Africa Development Community (Sadc) trade