Malawi’s biggest contributor to the national budget, the private sector, says it is yet to digest changes announced by Finance Minister Goodall Gondwe when he presented the financial plan in Parliament on Friday.
Gondwe presented a K1.29 trillion budget for the financial year 2017/18 which saw the education sector getting a lion’s share.
Among others, the budget assumes that domestic revenue is expected to jump by 17.0 percent.
But speaking in a telephone interview yesterday, Karl Chokhotho, who is president of the Malawi Confederation of Chambers of Commerce and Industry (MCCCI), which is the mouthpiece of the private sector, said they are yet to digest the figures presented by Gondwe.
Chokhotho said the Chamber should be able to give a concrete reaction to the budget after the 29th Malawi International Trade
Fair which opens on Wednesday.
Among other changes, Gondwe announced an upward revision of the minimum wage from K19,000 to K25,000 per month.
The minister also increased the tax-free income bracket from K20,000 per month to K30,000 per month.
Goodall also introduced an additional Pay As You Earn (paye) bracket of 35 percent for salaried income of above K3 million per month.
“Mr. Speaker Sir, the increase of the Minimum Paye threshold from K20, 000 to K30,000 is expected to cost Government revenue in excess of K10.0 billion. It is therefore prudent for government to explore other means of recouping this loss in revenue. One of the ways of recovering this lost revenue is by bringing in more progressivity in our tax system.
“In order to improve the distribution of income from the rich to the poor and increase the progressivity of the tax system, government is introducing an additional bracket of 35 percent on those earning salaried income above K3 million per month. I wish to highlight that this top rate of 35 percent will not affect individuals who earn their income from businesses,” said Gondwe.
The local Chancellor of the Exchequer also announced the introduction of a 10 percent excise tax on tv subscription.
Gondwe also revealed that as one way of reducing non-compliance with respect to payment of taxes promoted by varying interest rates on overdue taxes, Capital Hill will introduce a single formula for interest on overdue tax for all tax types.
He said the proposed change will standardise interest rates on overdue tax across all tax types and reduce tax administration costs and workload on the Malawi Revenue Authority.