The Malawi Economic Justice Network (Mejn), has maintained that the country’s tax system is still unjust and is merely promoting income inequalities among Malawians.
The network has reiterated this in its contribution to the 2014/15 budget made during a pre-budget consultation meeting held in Lilongwe yesterday.
In the presentation, touching on taxation policy and revenue matters, Mejn executive director Dalitso Kubalasa observed that the prevailing tax-free band is currently not matching the cost of living, biting most average and low income earners.
In the 2013/14 budget, government increased the zero percent threshold for Pay As You Earn (Paye) from K15 000 (US$37) to K20 000 (US$49) and the next K5 000 (US$12) taxed at 15 percent whilst the excess is taxed at 30 percent.
“We feel value added tax (VAT) is regressive and exempted goods are not in place where poor people shop, we feel this is an area that government should look into seriously in the forthcoming budget,” said Kubalasa.
He also recommended that government needs to review VAT and find ways of improving progressiveness of tax system.
A progressive tax regime allows tax payers to pay their respective taxes depending on their capabilities.
According to Kubalasa, although tax collection has improved at the Malawi Revenue Authority (MRA) as reflected by the tax collector’s ability to beat targets, there is still room for MRA to improve further.
He said time is also ripe for Malawi to expand its tax base and reduce the tax burden on a few people.
Kubalasa also said CSOs further recommend government to ensure that the public is engaged in tax policy formulation and implementation.
On this, Kubalasa suggested the need for the introduction of tax lessons in schools to ensure that youths grow up with full and clear knowledge of complying to tax.
“We feel also that there is an urgent need to exercise prudence in financial management to promote smooth disbursement of donor commitment,” he added.