Government revenue declines in first quarter

Debate rages on tax bracket proposal in Malawi

Post was last updated: July 27, 2020

There are contrasting views over time of effecting the proposed K100,000 zero-rated tax bracket as a taxation expert feel it could be backdated to when it was announced.

The specialist, Emmanuel Kaluluma, of EK Tax Consultants said in an interview that taxpayers could enjoy the tax free bracket in arrears if the Taxation Amendment Act is amended and operationalised in November.

But the Treasury says the law does not operate in retrogressive, meaning the proposed bracket could be effected from time of its approval by Parliament.

Kaluluma premised his argument on the notion that the government financial year commences in July, from when new tax measures are effected.

“The practical way for it to be easily done will be that employers will adjust, so from the time the budget is passed, they will pay less on Paye [Pay as You Earn] because they already overpaid and they will give that chunk to employees who were deducted on the excess of the previous bracket,” Kaluluma said.

When presenting a provisional budget to Parliament last month, Finance Minister, Felix Mlusu, announced the expansion of the zero-rated tax bracket from K45 000 to K100 000, a move, commentators say will help free up more disposable income to low income earners.

A week later, the Treasury announced that the implementation of the provision would await a full 2020/21 Budget where amendments to the taxation law will be provided for.

When presenting the K722.4 billion provisional four-month budget, Mlusu also proposed an increase in minimum wage, from K35 000 to K50 000, which is, however, subject to a consensus among stakeholder.

The Ministry of Labour has in recent weeks been engaging officials from Malawi Congress of Trade Union and Employers Consultative Association of Malawi for a review of the minimum wage.

Total revenue and grants in the provisional budget were pegged at K459.1 billion, of which K407.3 billion is domestic revenues and K51.9 billion are grants.

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