President Lazarus Chakwera has pledged to act on workers’ concerns on the newly-introduced Pay As You Earn (Paye) brackets, which have reduced salaries and eaten into their take-home pay.
The President made the pledge on Sunday in Mzuzu during commemoration of the International Labour Day, where the Malawi Congress of Trade Union (MCTU) urged the President to act on the new salary tax regime.
The new tax schedule came into effect on April 1 2022 and maintained the zero-rated tax band at K100 000, but revised other tax brackets with incomes between K100 001and K330 000 taxed at 25 percent.
Under the new schedule, workers earning between K330 001 and K3 million are now subject to 30 percent Paye while those earning between K3 million and K6 million pay 35 percent tax and those above K6 million pay 40 percent.
Chakwera said: “I have heard concerns that some taxes are not helping Malawians, that they continue pressing them hard. On Paye, let us discuss this matter. The Minister of Finance [Sosten Gwengwe] is away to the International Monetary Fund [IMF].
“When he returns, as he will be giving me a report on his trip, we will also tell him about the Paye concerns and then we will look at how best the matter can be resolved. Of course, the budget is already passed by Parliament, but we will look at what we can do so that the budget is not affected much, so that we help our people.”
Speaking during the event, MCTU president Charles Kumchenga urged the President to take action on Paye.
He said the introduction of the new schedule was hurting employees who are already facing economic hardships.
Said Kumchenga: “Mr President, this Paye schedule has reduced the take-home money for employees, people are being deducted a lot. Please, relook at this, so that things can improve, because it has moved from 25 to 30 percent. People’s incomes are dwindling.”
He also expressed concern over the rising cost of living in the country, saying the new tax schedule has made life worse for workers.
“The life of employees in this country is very tough. Workers in this country lack basic things that they require in their daily living, things like food, water, housing and electricity.
“There is a lack of social protection strategies, like on pension which is required by law,” said Kumchenga.
He urged the President to intervene, especially on fuel prices: “Because if you do that, we may see prices of many commodities getting down. Can you also talk to banks so that they reduce the lending rates because that will help grow business and create more employment opportunities?”
The MCTU president then took a swipe at companies that are failing to remit pension money deducted from employees to policyholders, urging urgent action on the same.
In an earlier interview, taxation analyst Misheck Msiska said the new tax brackets were an unfair situation that employees have to face.
He said: “Government indicated that it is trying to narrow the rich and poor gap, but we all know that the rich in Malawi are not salaried.
“Already, people in employment bear the biggest tax burden and this, therefore, is an unjust move that the government had to take.”
Presently, the cost of living in the country has continued to rise with latest figures showing the living standards rose by average an 5.45 percent to K255 593 last month, largely propelled by a rise in food prices.
The March 2022 Centre for Social Concern basic needs basket report shows that in the period under review, the food basket, which includes maize, milling and cooking oil, among other items, rose to an average of K147 134.
On the other hand, the non-food basket, which comprises housing, electricity and water, among other items, rose to an average of K107 985 for a household of six members.
Inflation, on the other hand, also continues to bite hard with fresh data showing it rose to 14.1 percent in March on account of rising food prices.