Revitalizing Malawi’s Economy: Minister Outlines Strategic Tax Reforms to Fuel Business Growth

Post was last updated: December 4, 2025

Key Business Points

  • Tax reforms: The Malawi government has introduced new tax measures, including a revised Pay As You Earn (Paye) structure and an increased value added tax (VAT) rate, to boost revenue and rebuild the economy.
  • Revenue mobilization: The government aims to balance revenue mobilization with social protection, but experts warn that tax reforms must be accompanied by efforts to lower inflation, stabilize the kwacha, and create jobs to avoid intensified economic hardship for low-income earners.
  • Economic management: The government must exercise prudent management of public resources and implement tax reforms rigorously to minimize unintended economic pressures and ensure the reforms achieve their intended objectives.

The Minister of Finance, Economic Planning and Decentralisation, Joseph Mwanamvekha, has defended the new tax measures introduced in the 2025/26 Mid-Year Budget Review, stating that they were adopted after careful consideration to ensure that those with a higher ability to pay contribute more towards rebuilding the economy. The revised Paye structure removes the 25 percent tax band and introduces new tax rates, including a 30 percent tax on incomes between K170 000 and K1.57 million, 35 percent on incomes up to K10 million, and a 40 percent tax rate beyond that threshold.

The government has also increased the VAT rate from 16.5 percent to 17.5 percent and introduced a 0.05 percent bank transfer levy and a 0.05 percent mobile money levy on transactions above K100 000. Additionally, the corporate income tax for companies earning "supernormal" profits has been revised downward from K10 billion to K5 billion. Mwanamvekha emphasized that the government remains committed to continuous dialogue with stakeholders and will monitor the impact of these measures closely.

Experts, including the Centre for Social Concern and the Economics Association of Malawi, have cautioned that tax reforms must be accompanied by deliberate efforts to lower inflation, stabilize the kwacha, and create jobs to avoid intensified economic hardship for low-income earners. The Economics Association of Malawi noted that while the proposed tax and non-tax reforms are expected to increase revenue, they could also spark unintended economic pressures, necessitating critical trade-offs during budget implementation.

The government has projected domestic revenue and grants at K5.46 trillion, a drop from K5.78 trillion, amid revenues underperforming by 43 percent and grants by 12 percent by mid-year. Parliament has passed the K8.589 trillion revised budget, and the government must now implement the tax reforms rigorously and exercise prudent management of public resources to ensure the reforms achieve their intended objectives. As ndalama za boma (government revenue) is crucial for economic growth, businesses and entrepreneurs must stay informed about the tax reforms and their potential impact on biashara za Malawi (Malawi’s businesses).

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Vanessa Banda
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