Tax-free band not enough—experts
Some tax experts and stakeholders have downplayed the revision of the tax-free threshold from K30 000 to K35 000, arguing it gives workers little opportunity to meet the food poverty line.
Minister of Finance, Economic Planning and Development Goodall Gondwe announced the revision in the proposed 2018/19 budget in Parliament on Friday in Lilongwe.
During the interviews with Business News the experts argued that it would have been fair if government increased the tax-free bracket to ensure a redistribution of income as a contribution to the reduction of the growing divide between the rich and poor.
While admitting that the tax-free band is a vicious cycle where government needs money to sustain its operations, senior tax consultant at EK Tax Consultants Emmanuel Kaluluma, said government should revisit the current tax band to take people out of poverty.
“What this threshold means is that everyone in this country who earns K35 000 is poor and, therefore, should pay tax. But we know that the poverty threshold should be more than K35 000 because even if we had more than K35 000 tax-free band, workers would still struggle to make ends meet,” he said.
“Government needs to look at the bigger picture. Instead of spending money on less priority things, it should be looking at ways to raise the poverty line. If our priorities were right, the poverty line should go up and money should be saved on the wastage that we see around.”
Malawi Congress of Trade Union (MCTU) president Luther Mambala said pay as you earn (Paye) is one of the surest way Treasury collects taxes but observed that it has done little to empower people to earn more.
“Most workers earn little and we know government has no choice but to collect from these people. But at K35 000 as a tax-free band, we are only seeing the poor getting poorer.
“We requested K50 000 for a purpose, knowing that we are also taxed in other areas. If this should be the case, government should revise the VAT downwards,” he said.
Centre for Social Concern (CfSC) economic governance programme officer Lucky Mfungwe said in an interview yesterday that they were looking for a higher increase in the tax-free band to ensure that those in the highest earning brackets contribute to the economy than is the case at the moment.
“We proposed K50 000 and not because the cost of living is K50 000, but looking at the resource basket and other factors.
“With K35 000, we know it would still be difficult for people to pay rentals and basic needs. It is, therefore, too low to add a K5 000 because if we consider inflationary factors this K5000 can even go lower,” he said.
During pre-budget consultations, raising the tax-free band has always been a recurring issue every year.
