Economic expert from the University of Malawi Ben Kalua has urged the government to ensure economic resilience and put in place modalities of increasing production to protect Malawians from rising inflation and cost of living.
This follows calls from the Centre for Social Concern (CfSC) for the government to consider reducing income tax from 25 percent to 15 percent to citizens who earn less than K200,000 a month.
The firm has based its argument on findings that the cost of living for a family of six rose to K207,334 in September and projections that the cost of living will be above K200,000 in the next six months.
It also comes against the background that inflation rose to 8.9 percent in September, 1.8 percentage points higher than the 7.1 percent recorded in September 2020.
In interview on Monday, Kalua said tampering with tax policies could not sustain the economy.
“The inflation rate issue is a global issue; every country, the United States, the United Kingdom they are all talking about energy costs that are pilling pressure on prices of other commodities. The pandemic has ushered in things that we never anticipated.
“What we have to do is just be resilient and make sure that we are more productive and therefore earning more; otherwise, tampering with taxes will not take us far and we need infrastructure development to inspire economic activity and growth,” Kalua said.
In a separate interview Economics Association of Malawi Executive Director Frank Chikuta said, going forward, the cost of living will remain elevated.
“The reason is that food and transportation increased significantly in September 2021. The increase in transportation in that month probably emanated from the strike by drivers. Increases in transport costs affect the costs of other items in the basket since transportation is a key factor in the production process,” Chikuta said.
But spokesperson in the Ministry of Finance Williams Banda said the government was exploring modalities of improving the welfare of Malawians.
“Tax should not be used to correct happenings in the economy, there are several ways such as creating jobs for the people. We are diversifying our exports to earn more dollars and we have also intensified efforts to curb corruption to protect the local industry and ensure its growth, not forgetting the revenue mobilisation strategy.
“All this is aimed at healing our economy and protecting Malawians from dire effects of inflation and cost-of -living trends. These calls would mean narrowing further our already narrow tax base so doing so is not an option,” Banda said.