The Centre for Social Concern (CfSC) has asked government to ensure fair distribution of tax revenues through initiatives that lessen the economic impact, especially for low income earners.
The statement from the centre says Malawi will remain among the poorest countries unless efforts are made to put the poor people at heart by way of fair distribution of resources.
In an interview yesterday, CfSC executive director Jos Kuppens said that government should take drastic measures to demonstrate that it cares for the plight of the people, especially the vulnerable and low income earners who are struggling.
He said the combination of rising prices and stagnating incomes place unsustainable pressure on family finances and the low income earners are the hardest hit as the gap between the cost of living and what they get at the end of the month is too wide.
Said Kuppens: “What we are proposing is for the government to raise the tax-free band so that the first part of the income is not taxed up to the level of the food cost of the basic basket need, let’s say K100 000. This means if you earn K50 000 you would get it without being taxed, thereby increasing the buying power for low income earners.
“As a balancing act for revenue loss from the tax-free band increase, government needs to raise tax for higher income earners and this will reduce the gap between the rich and the poor hence achieving fair distribution of resources.”
Kuppens also proposed consideration of citizens without paying jobs such as small-scale farmers, saying government is obligated to protect them through introduction of better markets with better prices on produce.
While welcoming the suggestions, Ministry of Finance, Economic Planning and Development spokesperson Davies Sado pointed out that CfSC and all concerned parties have an opportunity to raise the issues during pre-budget consultations.
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe said the proposal to waive value added tax (VAT) and increasing tax-free band could hurt the economy as government is already under-collecting tax revenue and grappling to provide social services.
He said: “From a broader perspective, the best solution in the long run is to increase economic growth that translates into more jobs and incomes, thus broaden tax base. Then these things would fall into place.”
The cost of living remains an issue for most people in the country as half of the population still live below the poverty line.
In its May Basic Basket Needs report CfSC said an average family of six living in Lilongwe, Zomba, Blantyre, Mzuzu and peri-urban areas of Mangochi needed at least K208 720 from K201 470 in April which represented an increase of 3.6 percent of the cost of living.
The main drivers for the rise in the basket the Centre said resulted from the increase in prices of beans, dry fish, tomatoes and onions, among others.