Assessment of Impact of the COMESA-EAC-SADC Tripartite Free Trade Area on Tax Revenue in Malawi

Abstract

This study assessed the impact of Malawi’s joining the upcoming COMESA-EACSADC Tripartite Free Trade Area (TFTA) on Malawi’s tax revenue. The TFTA countries have agreed to liberalise 60 to 85 per cent of tariff lines once the Agreement comes into force, while the remaining 15 to 40 per cent will be negotiated in due course. Three simulations were conducted using the Tariff Reform Impact Simulation Tool: full liberalisation, 85 per cent liberalisation, and 60 per cent liberalisation. The findings reveal that the TFTA will have a negative impact on Malawi’s tax revenue. The findings also indicate which are Malawi’s revenue-sensitive goods under the TFTA, and how the list will change depending on how much the country liberalises its trade. The study also establishes that Malawi’s manufacturing sector will be the most affected sector under the TFTA. In conclusion, it is recommended that since Malawi is joining the TFTA, it should consider improving and reforming tariff revenue collection to protect itself from the expected revenue loss.