What was termed labour taxes in The Nation article of January 26 2015; in our everyday language is called pay as you earn (Paye). In Malawi we have tax schemes that government has used for purposes of collecting taxes, these are Paye, withholding tax, provisional tax, Fringe benefit tax, non-resident tax, dividend tax, and of course value added tax (VAT). This, when looked at critically, is one way of risk management.
Government has, in its own way, assigned responsibility of collecting this tax to employers in case of Paye and other operators that make payment for goods and services.
The article made a case about the need of government to raise the zero rated thresholds so that low income earners are given a relief. This is a good suggestion. However, a threshold which is called poverty line means anyone getting K20 000 or below is poor and should not contribute towards government budget.
As a country, at the moment, we are all trying to gain economic independence so that we can run the country without going around the Western world with a begging bowl. I very much agree with you that Paye is high, especially for low income earners. And at the same time we should have as many Malawians as we can take part in building our country. The most possible way of doing it, is through payment of taxes. This should not only be through VAT but personal taxes as well and in case of employees, this should include Paye.
At an international scale, without going into the debate of the cost of living in Malawi, the World Bank once placed a living wage not to be less than a dollar a day. In my view, our minimum wage is around that if it were enforced. For us to imagine that everyone earning a little over K20 000 per month is poor and should not contribute to developing our country could be subject to debate. Many of us could be in that bracket and we will be denied the opportunity to take part in building our country. My position is that as many of us Malawians, including those working for embassies or high commissions, should be paying taxes.
In my view, government should take a close look at the rate structure for Paye. You cannot have people who are being paid in millions plus per month be subjected to tax at 30 percent, which is applicable to people who are in low income bracket of just a little over K20 000 per month. My argument is that the band or bracket which people should be subjected to tax at 30 percent should move from K5 000 to a higher figure, for instance if this figure moved from K5 000 to K30 000 at 15 percent the majority of the low income earners will have a tax relief and government can further make adjustments for high income earners.
As scholars have said before, “There is no equity in taxation”, you earn more, you pay more. We should keep in mind that government collects taxes, among other reasons, to provide goods and services to its people. Furthermore, taxes are collected as a tool distributing wealth between the haves and the have-nots to ensure equity in society.
Therefore, as a country, once this is done we should make deliberate efforts to control expenditure. Is it not strange that a person is given fuel worth 1000 litres per month? What is this fuel for? Such type of conditions of service in favour of senior public officers violates the spirit behind payment of taxes and results into the type of outcries that we are reading about in the media.