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MALAWI: Used Car Dealers Seeing Red Over New Green Tax

Claire Ngozo

LILONGWE, Aug 12 2010 (IPS) - Small-scale importers of used cars in Malawi are crying foul over a government decision to introduce higher duties on second-hand passenger vehicles aged eight years and older.

Second-hand cars from Japan parked at a roadside vehicle market in Biwi, Lilongwe. Credit: Claire Ngozo/IPS

Second-hand cars from Japan parked at a roadside vehicle market in Biwi, Lilongwe. Credit: Claire Ngozo/IPS

In recent years, Malawi has seen an influx of used cars, mostly imported from Japan. The vehicles are sold at low prices, some as cheap as 2,500 dollars apiece.

Used car dealer Amanda Kwada explained to IPS the route that the car imports follow into Malawi: from Japan, the vehicles are brought in via Durban in South Africa or Dar es Salaam in Tanzania.

Kwada employs three people to manage different parts of the business. A driver collects the vehicles at either one of the ports and brings them to Lilongwe, Malawi’s capital.

Kwada displays the vehicles on the roadside to attract potential customers. She has a guard overseeing the vehicles and a sales person who seeks out new customers.

Car vendors such as Kwada are up in arms over the new tax measures, announced in May 2010, which they say will destroy their businesses or result in much higher prices.

Kwada has been importing second-hand cars from Japan for the past four years but now fears that her business will be destroyed, following the decision by government.

She worries that the new duties are too high for her business to show a profit and that she may have to abandon the trade. The people she employs will lose their livelihoods.

Kwada (42) supports an extended family with the profits she makes: “I am not sure if I could continue doing that now that the business is becoming complicated.”

Some customers of second-hand car dealers are also opposed to the measures. Patricia Kalilombe (23) works as a secretary at a company in Lilongwe. She told IPS that she was able to afford a car using savings from her salary.

“I only paid about 4,000 dollars for the vehicle because it was second-hand. I never dreamt I would own a car at this age. The decision by government to increase taxes on old cars will be an impediment for all the people who do not have much money but still want to own a vehicle,” said Kalilombe.

Malawian finance minister Ken Kandodo explained the reasons behind the new tax regime by referring to the declaration of the United Nations Climate Change Conference in December 2009. The conference, he said during his budget statement in May 2010, called for countries to take action against climate change.

“Government is committed to taking bold steps towards the reduction of pollution in the environment and avoid dumping, particularly of motor vehicles,” Kandodo told the Malawian parliament.

The new duties are as follows: an additional 20 percent duty will be charged on passenger vehicles aged between eight and 12 years, while those older than 12 years would attract an additional 50 percent duty.

Regarding passenger vehicles aged up to eight years, current rates of duties would continue to apply.

Goods vehicles exceeding 10 tons and that are older than 15 years would attract a 20 percent duty. There was no duty on such vehicles until this announcement.

Car vendors started fighting the tax measure even before the national budget was passed. They staged a protest march to the national assembly building where they presented a petition against the budget.

But the demonstration did not deter parliamentarians from endorsing the new tax measures and they proceeded to pass the budget.

The dealers continued the fight in court on Jun 16 by obtaining an injunction stopping the Malawi Revenue Authority, a government agency responsible for the collection of tax revenues, from enforcing the new duties.

The car traders have since asked the court to carry out a judicial review of the taxes. The vendors are describing the new tax as “draconian” and claim it will kill small-scale dealers who depend on vehicle sales for their livelihood.

The car traders have the backing of the Consumers Association of Malawi (CAMA), an influential nongovernmental organisation that promotes consumer rights.

CAMA executive director John Kapito told the local media that taxes should be formulated to contribute to national development, and not as “punishment”.

The Indigenous Business Association of Malawi (IBAM) – a grouping of local traders – added that the new tax measures are contrary to government efforts to promoting local entrepreneurship in the country.

Meanwhile, the vendors wait for the court to rescue them from the new tax measures.

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