Effects of import taxes on intra‐African trade: New evidence from a case study of Malawi's imports

Abstract

We investigate the effect of import duty, import excise and import value‐added taxes (VAT) on Malawi's import prices, values and volumes in trading with Africa. We find that import taxes increase import prices, with import VAT having the largest impact. Import duties lead to higher import values, but by a much smaller extent and import duties and VAT have a positive relationship with import quantities from COMESA while a negative one with SADC countries. In relation to AfCFTA, an increase in relative market access increases the probability of a product being from an African country, while high import duties decrease the probability of Malawian importers trading with other African countries. The presence of import VAT further reduce these odds. Zero tariffs in the AfCFTA may only increase intra‐African trade marginally. Other policies on market access and other import taxes need to be assessed, while accounting for potential fiscal implications.