An Analysis of the Tax Incidence of VAT to Milk in Malawi

C Revoredo-Giha*, Luiza Toma*, Faical Akaichi*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)
65 Downloads (Pure)


Dairy is a key investment sector for the Government of Malawi. On 1 October 2016, the Malawi Revenue Authority announced that milk, which until then had been exempted from value added tax (VAT), was going to be taxed at the standard rate of 16.5 percent. The measure has been met with strong opposition and thus, was short lived (eliminated in May 2017). The purpose of this paper is to present an analysis of the effect that such a tax would have on its incidence, on the different stages of the supply chain, and ultimately on its economic and social sustainability. The paper investigates these implications by developing a multimarket model applied to the Malawian dairy supply chain. The results indicate that 24.3 percent of the VAT revenues would be borne by consumers and the remaining 75.7 percent would be borne by the domestic dairy industry (i.e., processors and smallholder farmers). This was due mainly to the value of the price elasticity of consumers’ demand for pasteurised milk. The results highlight the vulnerability of inclusive value chains to economic policies that may affect consumers’ demand.
Original languageEnglish
Article number8003
Pages (from-to)1-17
Number of pages17
Issue number19
Early online date27 Sept 2020
Publication statusPrint publication - 13 Oct 2020


  • Dairy industry
  • Malawi
  • Supply chain models
  • Tax incidence analysis
  • VAT


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