Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has cautioned that while revenue measures in the 2025/26 National Budget may help fix Malawi’s fiscal challenges, but could strain businesses.
The chamber said that increased transaction levies, higher value added tax (VAT), introduction of a minimum alternate tax and higher withholding and capital gains taxes will raise the cost of doing business, compress cash flows, and potentially reduce firms’ capacity to reinvest and expand.
For many formal businesses, already operating under foreign exchange shortages, high interest
rates and weak demand, MCCCI says these measures may further strain profitability and, in some cases, discourage formalisation and investment.
In its 2025 Annual Economic Performance and Business Review, MCCCI says the cumulative tax burden in the short-term risks slowing private sector activity, with possible knock-on effects on employment and economic growth.
Reads the review in part: “Against this backdrop, policy efforts should increasingly shift away from repeatedly taxing the same compliant formal businesses and instead focus on broadening the tax base to largely untapped areas of the economy.
“A balanced approach that combines revenue mobilisation with private sector support is essential. By widening the tax base and reducing over-reliance on formal businesses, government can protect competitiveness, sustain investment, and promote inclusive growth while still achieving fiscal consolidation objectives.”
Among the areas to consideration for private sector growth, MCCCI has since proposed for fiscal discipline and public finance reform, energy infrastructure development, export diversification and market expansion and foreign exchange and external sector resilience.
The tax measures in the Mid-Year Budget Review for 2025/26 focus on widening the tax base, increasing progressivity, and capturing revenue from previously under-taxed activities and sectors.
Meanwhile, the tax changes took effect on January 1 2026 after President Peter Mutharika assented to the Taxation Act (Amendment) Bill and the Value Added Tax (VAT) Amendment Bill, alongside other Bills.
The changes raise the zero pay as you earn (Paye) threshold from K150 000 to K170 000, but also introduces higher marginal rates: 30 percent for incomes from K170 000 to K1.57 million, 35 percent for incomes up to K10 million and 40 percent for earnings above K10 million.
VAT has increased from 16.5 to 17.5 percent.
The Malawi Revenue Authority (MRA) instructed VAT-registered operators to apply the new rate immediately.
In an interview,Centre for Social Concern economic governance officer Agness Nyirongo said for Malawi to balance revenue mobilisation with social protection, tax reforms should be accompanied by deliberate efforts to lower inflation, stabilise the kwacha, strengthen food security and create jobs.
Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamvekha had defended the taxes, but indicated that government remain committed to continuous dialogue with all stakeholders.
“We will monitor the impact closely to ensure that these reforms achieve their intended objectives without undermining business confidence or economic activity,” he said
