Malawi has increased tax on the rich, with Minister of Finance Felix Mlusu saying the measure will promote distribution of wealth in the country.
Mlusu presented the 2021/22 budget this afternoon at Parliament in Lilongwe where he announced the tax measures.
The minister argued that a good tax system needs to conform to the principles progressiveness or vertical equity in that high-income earners should pay more taxes.
According to Mlusu, Government has introduced two new Pay As You Earn (PAYE) brackets of 25 percent for incomes between K100,000 to K1.0 million per month and of 40 percent for incomes of more than K6.0 million per month.
Accordingly, the new monthly PAYE schedule will be K0 to K100,000 at 0 percent; between K100,000 to K1.0 million at 25 percent; between K1.0 million to K3.0 million at 30 percent; between K3.0 million to K6.0 million at 35 percent; and from K6.0 million and above at 40 percent.
“This will promote distribution of wealth in the country and increase disposable income for all low-income earners,” Mlusu said.
He added that new measures have been introduced to incorporate huge number of businesses in the informal sector that are not yet in the tax net.
One of the mandatory requirements is Tax Clearance Certificate for all people vying for elected public offices; for all regulated professionals and when issuing or renewing Certificate of Fitness for commercial vehicles.
Government will also introduce a requirement for all citizens to have Tax Payer Identification Number (TPIN) and people will be required to sow TPIN when opening bank account.
The K1.9 trillion budget which Mlusu has presented includes K436.3 billion allocation for wages and salaries.
It also includes K12 billion for maize purchase, K142 billion for Affordable Inputs Programme and K400 million for the construction of houses for people with albinism.
Mlusu said government reduced the Visa rates to promote the tourism sector considering that it has been affected by Covid-19.
On free electricity connection, he said the Ministry of Energy has completed drafting of the Free Electricity Connection Policy which will provide a platform for free connection of electricity to individuals and public institutions in these rural and pre-urban areas.
“Under this arrangement, connection fees which averages K17,500 will be scrapped off. Implementation will commence in July”, he explained.
There is also a plan to start paying Early Childhood Education Development care givers K15,000 monthly to motivate the workers.
In an interview, Mlusu said that the budget is focusing on promotion of job creation, economic empowerment for women and youth and private sector.
Commenting on the budget, Former Finance Minister Joseph Mwanamvekha said that the budget is unrealistic because it is working on assumptions.
Mwanamvekha added that it is very unfortunate that some of the things that people were expecting to be addressed have not been included more especially measures that could have led to reduction of prices of goods such as cooking oil.