Empowers through their umbrella body, the Employers Consultative Association of Malawi (Ecam), have faulted government for introducing and implementing a new Paye As You Earn (Paye) tax bracket without consulting relevant stakeholders.
Ecam said while it appreciates that the cost of living in the country has gone up, necessitating a revision of the minimum wage, the revision has to be in line with the capacity of employers to absorb the new wage.
Presenting the 2017/18 national budget to Parliament a few weeks ago, Finance Minister Goodall Gondwe announced new tax measures that included the introduction a new Paye tax bracket of 35 percent for those earning K3 million and above.
But in a statement signed by its Executive Director, Beyani Munthali, Ecam said it expected government to explain how Treasury arrived at the amount before enforcing the new measure.
The statement said Ecam and the Malawi Congress of Trade Unions had agreed that the lowest Paye tax threshold should be adjusted in accordance with the minimum wage.
“However, to our [employers] surprise this has been shifted to K30,000 instead of the minimum wage of 25,000,” the statement says.
Ecam, as the representative of employers, participates in the consultations and negotiations towards the adjustment of the minimum wage.
In a separate interview, General Secretary of the Communication Workers Union of Malawi (Cowuma) Hamilton Deleza said the union is concerned about government’s presentation of the monthly minimum wage rate of K25,000.
“The K25,000 is not reflective of K1,250 per day. I don’t know the basis for K25,000 but it seems he [Gondwe] assumed people will work 20 days in a month which is contrary to salary calculation.
“It will be better if emphasis is given to the daily rate while the monthly rate should be based on existing parameters and not what the nation has been told by the Finance Minister,” he said.
While government is being commended for adopting a progressive tax strategy in the 2017/18 national budget, some experts have also asked government to tighten tax compliance and develop other industries to boost the resource envelope.
A progressive tax is a tax that takes a larger percentage from high-income earners than it does from low-income individuals.