By Mercy Matonga:
Malawian workers are experiencing significant salary cuts following the implementation of new tax measures in January, with economists warning the move could trigger reduced consumption, business closures and job losses.
The Taxation Amendment Bill, which was passed by Parliament in December 2025, introduced higher marginal tax rates of 30 percent for incomes between K170,000 and K1.57 million, 35 percent for earnings up to K10 million and 40 percent for incomes above K10 million, resulting in reduced take-home pay for middle and high-income earners.
Consumers Association of Malawi Executive Director John Kapito said the tax increases have severe negative impact on consumer welfare, with workers ultimately bearing the cost.
“With limited prospects for salary increases, consumers will continue to face worsening economic conditions, leading to reduced demand for goods and services, possible business closures and job losses,” Kapito said.
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He said the measures could become self-defeating for government revenue collection as reduced consumption translates to lower tax receipts while retrenchments may increase as producers respond to falling demand and weakened purchasing power.
Economics Association of Malawi President Bertha Bangara-Chikadza said the situation could jeopardise household welfare, saying living standards were likely to decline.
“The government should adopt a balanced approach that protects vulnerable households while maintaining fiscal sustainability,” Chikadza said.
She said higher taxes did not automatically translate into economic improvement, saying impact depended on revenue utilisation.
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Malawi Confederation of Chambers of Commerce and Industry Chief Executive Officer Daisy Kambalame said reduced disposable income, coupled with high prices, would weaken purchasing power and slow economic activity.
She said there was a need to introduce targeted interventions and temporary tax relief for low-income earners.
Furthermore, Kambalame urged reduced energy and fuel costs to prevent further price increases.
She also called for dialogue among the government, private sector and labour force representatives.
The new tax regime comes at a time prices of basic commodities, including fuel and food, continue rising, placing additional pressure on household incomes already stretched by years of economic hardship.
Ministry of Finance spokesperson Williams Banda defended the measures, saying they protected low-income workers while slightly increasing deductions for higher earners.
“The government is also working on reducing the cost of borrowing through reduction of interest rates that will help improve local production. All these efforts are expected to reduce prices of goods in the local market and will, in turn, contain the cost of living,” Banda said.
The tax changes raised the Paye tax-free bracket from K150,000 to K170,000, alongside adjustments to VAT and introduction of levies on mobile money and bank transfers.
However, workers whose earnings fall within the new taxable brackets have seen their monthly salaries reduced despite the raised tax-free threshold.
