The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says the country will require much more than prudent financial management which has hitherto been elusive to maintain economic stability.
MCCCI chief executive officer Chancellor Kaferapanjira said this in an interview on yesterday in reaction to the K1.29 trillion 2017/18 National Budget presented by Minister of Finance, Economic Planning and Development Goodall Gondwe in Parliament on Friday.
Kaferapanjira said that the country will require deliberate efforts to promote production, which can be a source of food and foreign exchange, the major drivers of inflation in Malawi.
He, however said the direct impact of the Budget Statement on business lies in the changes in the tax measures which he said will affect businesses.
“The Minister of Finance correctly observed that one of the reasons Malawi has not maintained its enviable growth rates before is
policy reversals. If such reversals are so impromptu, they disorient company plans. As such government should avoid such hasty decision-making in future.
“Taxing labour more generally has the effect of incentivising laziness as people feel that every extra kwacha earned is going to be shared more with government and as such they may opt to enjoy leisure instead of working harder to achieve the seven percent gross domestic product [GDP] growth rate which Malawi needs to double per capita income in ten times as per the minister’s projection,” he said.
Kaferapanjira, however, said government should have been expanding the tax-free band by the average annual inflation rate each year.
“Given that the average annual inflation in Malawi since July 2013 has been very high, taking inflation into account would require the expansion of the tax-free bracket by well over 100 percent.
“In addition, the minister also emphasises in the strongest terms that some taxes such as 10 percent excise tax on fee-based TV services have been introduced as government is shifting reliance from income, production, and investment-based taxes to consumption-based taxes. How then does the same Minister of Finance introduce a new tax bracket of 35 percent to tax labour? This is very anomalous and retrogressive, and should be corrected,” he said.
Among other changes, Gondwe announced an upward revision of the minimum wage from K19 000 to K25 000 per month and an increase in the tax-free income bracket from K20 000 per month to K30 000 per month.
The minister also introduced an additional Pay As You Earn (Paye) bracket of 35 percent for salaried income of above K3 million per month.
“In order to improve the distribution of income from the rich to the poor and increase the progressivity of the tax system, government is introducing an additional bracket of 35 percent on those earning salaried income above K3 million per month. I wish to highlight that this top rate of 35 percent will not affect individuals who earn their income from businesses,” said Gondwe.
Weighing in, Chancellor College economics professor Ben Kaluwa said while the growth is attainable, there is need to put in place deliberate policies which should enhance growth such as the removal of maize export ban.