The Institute of Chartered Accountants in Malawi (Icam) has asked Finance Minister, Joseph Mwanamvekha, to consider reducing the Value Added Tax (VAT) rate from the current 16.5 percent to 12 percent.
In its written 2020/21 national budget submission to Mwanamvekha, Icam says the move would encourage consumer spending to stimulate the economy and business.
Icam says reducing the VAT rate slightly increases the consumption of food.
VAT is a tax on consumption expenditure that is levied on the value added that has been created at various stages in the production and distribution chain. The standard rate for VAT in Malawi is 16.5 percent except those listed on the 1st Schedule and the 2nd schedule to the Taxation Act.
The 1st Schedule lists Exempt Supplies which do not attract VAT while the 2nd Schedule lists Zero-rated Supplies where VAT is charged at zero percent.
Icam has further asked the Finance Minister to increase the tax free band from the current K45 000 to K100,000 per month.
“Lower taxes should form part of the Government plan for delivering a stronger economy and record job creation. The Government’s strong fiscal management means that it can deliver surpluses while also rewarding hard-working Malawians and supporting small businesses.
“Lower taxes will support consumption, growth and strengthen the economy. The government should support a progressive tax system that eases cost of living pressures, provides reward for effort and sustains economic growth,” Icam says.
The accountants have also asked the government make a deliberate policy to encourage manufacturing and Agriculture industries and give them time bound incentives such as withholding tax exemptions for start ups in these industries.
This, the accountants argue, would help reduce imports and would encourage goods to be manufactured locally.
Through value addition, the accountants say, local companies could earn more than what they are earning at the moment.
In addition, the accountants have also asked Mwanamvekha to consider turn the Farm Input Subsidy Programme into Farm Input Revolving Loan to be disbursed and collected through village farmer clubs.
“This would ensure that poor rural households graduate from perpetually depending on the government to self-sufficiency. The funds to be collected will allow government to reach out to more households,” the accountants say.
Treasury Spokesperson, Williams Banda, on Wednesday said the Ministry of Finance is currently looking at all proposals submitted and would see which points to be incorporated in the 2020/21 national budget.
Today’s top business story: Top Commercial Banks In Malawi
- Government defends new tax on profits - March 2, 2024
- Must students’ fund thrills Standard Bank – The Times Group - March 2, 2024
- Funding challenges cripple extractive industry—official - March 1, 2024