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Malawi news: Parliament nods to tax free band raise

Parliament Monday passed the taxation bill allowing the government to increase the tax free band of Pay as You Earn (Paye) from K45, 000 to K100, 000 effective October 2020, among other things.

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The tax free threshold of casual labour has also been increased from K15, 000 to K35, 000.

The adjustments would help freeing some disposable income to low income earners according to economic experts.

Passing of the bill also allows the government to earn a 20 percent withholding tax on all winnings from betting, gambling and lotteries.

Minister of Finance Felix Mlusu told journalists the bill would help increase level of disposable income for Malawians in the working category.

“To employees, obviously, these amendments entail an automatic increase in their take home pay on the tax threshold. Similarly, for the casual labourors, their disposable income is going to improve by the increase in the band,” Mlusu said.

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However, the bill would only come into effect once President Lazarus Chakwera assents to it according to Mlusu.

But in a separate interview, former minister of finance and Democratic Progressive Party spokesperson on finance, Joseph Mwanamvekha, said the new tax free band would only benefit few people that are in the formal sector.

He also said introduction of a 20 percent withholding tax on winnings from betting and lotteries could hurt the industry.

“There are so many ways government can widen the base other than exploiting the poor and the disadvantaged.

“Let me urge the government to expedite the delivery of one million jobs that were promised. Otherwise, this [the bill] only benefits a few, hence, having less impact on disposable income,” Mwanamvekha said.

Outside the chamber, debate has also ensued on timing for effecting the new law with other circles saying the tax regime should have been applied from July 1, 2020

Taxation expert, Emmanuel Kaluluma, said implementation of the law should have coincided with the commencement of the new financial year.

“This is how the tax rate structure works and it means 0 percent on K100,000 per month starts from the month of July 2020. Employers will have to adjust some employees at K100,000 below have overpaid and those above because of the removal of 15 percent will have underpaid for the months in question,” Kaluluma said.

A communiqué from the Secretary to Treasury to the Secretary for Human Resources at Capital Hill, ref no: FIN/ RPD/6/3/3/21, which we have seen, shows that the change will be effected for the entire fiscal year.

“Following this amendment, kindly be advised that calculation of income tax salaries of public servants for the 2020/21 fiscal year should be done as follows; first K1,200,000at 0 percent rate, next K34,800,000 at 30 percent rate and excess of K36,000,000 at 35 percent rate,” reads the communiqué in part.

Meanwhile, the august House agreed to re-introduce a 16.5 percent Value Added Tax (VAT) on cooking oil despite removing the same three years after its negative impact on the industry.

United Democratic Front spokesperson Lilian Patel asked the government to reconsider the decision stressing the decision will hurt the industry.

MP for Chikwawa North Owen Chomanika questioned the Minister’s rationale to re-introduce VAT on the cooking oil when the same house had removed the tax three years ago.

Thyolo Central legislator Ben Phiri requested the Mlusu to rethink the position of the bill, as it will suffocate the industry.

Mlusu, however, dismissed the fears emphasising the decision will not hurt farmers or consumers as the development will not increase cost of production.

Source: times.mw
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