Calls mount for paye, Minimum wage review

Employers Consultative Association of Malawi (Ecama) and other stakeholders have asked Treasury to review the monthly minimum wage and raise the zero-rated tax band due to the challenging economic environment.

In their submission during the  2023/24 Pre-Budget Consultation Meeting on Monday in Blantyre, Ecam executive director George Khaki said employers want the monthly minimum wage to be raised by at least 30 percent from K50 000 to K65 000 and also increase the zero-rate tax band from K100 000 to K150 000.

He said this may not only cushion the effects of runaway inflation on disposable incomes, but also increase aggregate demand for goods and services which has gone down.

Said Khaki: “The current inflationary trends which in November 2022 was at 25.8 percent have seen employees’ incomes being eroded significantly thus affecting their economic well-being.

“Ecam also notes that the industry is experiencing significant challenges in terms of productivity. This affects its ability not only to adequately reward employees, but to also retain and create employment.”

In an interview yesterday, Centre for Social Concern economic governance programme officer Bernard Mphepo said they want the minimum wage raised to K100 000 while the zero-ratefree bracket should also be raised to K200 000.

He said: “The cost of living in 2020 was K164 000 when it was revised and now it is now over K327 000. This justifies the increase in cost of living.

“For free-tax band, the average income in 2022 was above K300 000; hence, anybody who is earning below K300 000 is struggling to survive. It is irrational to tax someone who is struggling.”

In his presentation, Institute of Chartered Accountants in Malawi acting chief executive director Charles Chimpeni also urged Treasury to increase the zero-rate tax band to K250 000 in view of the high cost of living.

He also urged Treasury to revise the 40 percent tax charged on those earning in excess of K6 million, observing that “it is unfair to high salary earners”.

In the 2022/23 National Budget Statement, Minister of Finance and Economic Affairs Sosten Gwengwe, while maintaining the zero-rate tax band at K100 000, revised other tax brackets with those earning between K100 000 and K330 000 taxed at 25 percent, those earning between K330 000 and K3 million taxed at 30 percent while those earning between K3 million and K6 million are taxed at 35 percent.

Those earning above K6 million are taxed at 40 percent.

This was a revision from the Paye brackets in which those earning between K100 000 and K1 million were taxed at 25 percent, 30 percent was levied on those earning between K1 million and K3 million while those earning above K6 million were being taxed at 40 percent.

At that time, Gwengwe justified the move, saying it was meant to improve the progressivity of the Paye system and also ensure that government continues to collect realistic revenues from the tax line.

However, in an interview on Monday the minister said looking at the current economic situation, Treasury would want to look at the minimum wage because the value of K50 000 has been eroded.

Said Gwengwe: “People would want to use the route of tax cut to spur production. The only problem with that is that most of the times those policies lag for us to be able to get the benefit, it might take time.

“We are at a time when we need to balance what we are spending and what we are collecting. There are other mechanisms that we would want to put in place no matter how painful they might be, but we know that in the longer-term; Malawians will understand why we had to go through some of those things.”

Consumers Association of Malawi executive director John Kapito welcomed the proposal for the tax-free bracket increase and minimum wage reviews.

“The current minimum wage is a disgrace to workers,” he said.