Ecama hails Pay-as-You Earn tax-free bracket

Economists have hailed government for the upward revision of the tax-free band, stating that the revision is one way of ensuring redistribution of income as a contribution to the reduction of the rich-poor gap.

Minister of Finance Economic Planning and Development Joseph Mwanamvekha announced in the 2019/20 National Budget tabled on Monday that government has increased Pay-as-You Earn (Paye) tax-free bracket from K35 000 to K45 000  per month.

This according to Mwanamvekha was done in view of the cost of living and to increase disposable personal income.

In separate interviews on Wednesday, local economists body and independent commentators said an increase the tax free band would ensure that those that earn significantly higher to highest earning brackets be allowed to also progressively contribute to the economy.

Economics Association of Malawi (Ecama) executive director Maleka Thula described the development as positive and fair for low income earners.

“This measure will allow low income households to have higher disposable income given that the minimum wage has also been increased upwards. Given the size of our economy, K45 000 is relatively good enough to support the majority of working population earning minimum wage,” he said.

While economist Lucky Mfungwe said the increase in tax free band will up lift the lives of the working poor by increasing their disposable income.

However, he argued that with time, the government should strongly think of moving towards sector specific wages which reflect levels of money circulation within the sector.

He argued:  “The banking sector for instance may not be compared to domestic workers sector; government is, therefore, advised to pay attention to this. Most importantly we know this is statement, what we want to see is government implementing what is said in this plan.”

Economic commentator Gilbert Kachamba also said it is important that people have more disposable income as this would ensure a decent standard of living for Malawians.

The country’s cost of living—cost of maintaining a certain standard of living — is recorded to have increased between January and mid this year, with Centre for Social Concern (CfSC) data showing that an average Malawian needs over K100 000 in a month to earn a decent living.