Malawi Congress of Trade Unions (MCTU) and Centre for Social Concern (CfSC) have hailed the two new Pay As You Earn (Paye) tax brackets saying they will increase disposable income for lowly paid workers.
Speaking in separate interviews in response to the proposed K1.9 trillion 2021/22 National Budget in which government has announced Paye brackets of 25 percent for incomes between K100 000 to K1 million and 40 percent for incomes of more than K6 million per month, the organisations say this will help reduce the gap between the rich and the poor.
MCTU president Charles Kumchenga, in an interview on Monday, said the new brackets would provide more income for the workers who earn less.
He said: “We are eager and keen to see government effecting these measures.
“Although they are not enough to bring people out of poverty, they are a right step towards ensuring that lowly paid workers have more incomes.”
On his part, CfSC programmes officer for economic governance Bernard Mphepo said this will help reduce inequalities by allowing the rich to pay more taxes while the poor pay lesser taxes on their income.
He said: “We believe that reducing Paye marginal tax rates for citizens who receive lower income will spur economic growth.
“The lower income tax rates will give people more disposable income that could be used to buy more goods and services thereby increasing gross domestic product [GDP].”
However, Mphepo, said there is need to introduce another tax bracket below the 25 percent for people earning below the current cost of living, currently at K209 000 per month for an average family of six, to enable them have more disposable income to be able to buy basic needs.
In his 2021/22 Budget Statement presentated in Parliamant on Friday, Finance Minister Felix Mlusu said the measures are a means to promote distribution of wealth in the country and increase disposable income for all low income earners.
Accordingly, effective July 1 2021, the new monthly Paye schedule will remain at zero percent for those earning between K0 to K100 000, 25 percent for those earning between K100 000 to K1 million, 30 percent for those earning between K1 million to K3 million, 35 percent for those earning between K3 million to K6 million and 40 percent for those earning over K6 million.