Government’s recently revised taxes have prompted calls for a minimum wage review to cushion Malawians against an escalated cost of living. Centre for Social Concern (CfSC) economic governance officer Agness Nyirongo said in an interview that adjusting the minimum wage would “restore human dignity”. The minimum wage—currently at K126 000 per month for employees in formal employment and K72 800 for domestic workers—was last reviewed in June this year.
“With the cost of living now close to K1 million per month, the current minimum wage is inadequate,” she said. “Reviewing the minimum wage and encouraging the private sector to adjust salaries would restore purchasing power and protect human dignity.” CfSC estimates the cost of living to be at K945 029 per month for an average household. Several households, however, do not earn as much; hence, struggle to make ends meet.
Minister of Finance, Economic Planning and Decentralisation Joseph Mwanamveka told Parliament that the new taxes are meant to cushion such low-income earners. Under the new tax regime, the zero Pay As You Earn (Paye) bracket has slightly increased from K150 000 to K170 000. Those earning between K170 000 and K1.57 million will now be taxed at 30 percent, up from 25 percent.
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Earners of up to K10 million will be taxed at 35 percent while those earning beyond K10 million will face a 40 percent tax. Value Added Tax (VAT) has jumped from 16.5 percent to 17.5 percent—a six percent jump—while the Malawi Revenue Authority will now be collecting rental income on residential property. Parliament on Tuesday passed the Taxation (Amendment) Bill which has such tax provisions, among others. But as a further cushioning mechanism amid the new tax regime, Nyirongo said government should consider expanding the list of VAT-exempt items to include more essential goods such as maize flour, sanitary products, school materials and basic medicines.
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