Tax measures aim to boost investment

New tax measures in the 2013/14 Malawi National Budget will slightly add more money in low income workers’ pockets and help boost investment in sectors prioritised under the Economic Recovery Plan (ERP).

Under Pay As You Earn (Paye), government has increased the non-taxable amount on individuals from K15 000 (about $37) to K20 000 (about $50) in what Finance Minister Ken Lipenga on Friday said would help mitigate the effects of the kwacha devaluation and its inflationary effects.

In the 2012/13 budget, government increased the zero percent threshold for Paye from K12 000 to K15 000 and also raised the 15 percent bracket from K3 000 (about $7.50) to K5 000 (about $12.5). This year, the next K5 000 will still be taxed at 15 percent while the excess will continue to attract 30 percent.

“It is clear that Malawians are beginning to witness signs of recovery in our economy. However, in some cases, the impact of the devaluation and its inflationary effects are still being manifested in the economy and this is affecting the welfare of the people,” he said.

Malawi Economic Justice Network executive director Dalitso Kubalasa welcomed the increase and said it would mean that a majority of Malawians who are low income earners will cart home a meaningful amount.

“It’s not much but I think it’s a step in the right direction in as far as getting some relief for a lot more Malawians who don’t get as much as income,” he said.

Government has also offered tax holidays to investors, especially those that are adding value to local raw products.

Lipenga said the fields of agro-processing and electricity generation have been marked as priority industries for purposes of tax holiday as required under the Taxation Act.

Lipenga, however, warned that government might withdraw this initiative at any time if it feels it is not working.