ICAM suggests adjustment of PAYE tax-free band to K300,000 in the 2025-2026 National Budget to mitigate inflation effects

* Reduce the higher end (marginal) tax rate from the current 35% to 30% to synchronise it with the corporate tax rate for employees

* Individuals don’t get relief for expenses unlike corporates and the the threshold of marginal tax rate for employees be review

* From K2,550,001 to K6 million per month since they are seen to pay tax at a rate higher than prevailing corporate tax

By Duncan Mlanjira

Forex scarcity which is impacting essential imports of goods such as fuel, the shrinking tax base are causes of the high inflation the country is facing — leading to increase in the prices of essential household commodities.

Thus, in its proposal to the presentation of the 2025-2026 National Budget, Institute of Chartered Accountants (ICAM) suggests that the pay-as-you-earn (PAYE) tax-free band should be adjusted from K150,000 to K300,000 to mitigate inflation effects.

In his presentation during the pre-budget consultation session convened by Minister of Finance & Economic Affairs, Simplex Chithyola Banda at Sunbird Mount Soche in Blantyre yesterday, ICAM Chief Executive Officer, Noel Zigowa also asked government to introduce tax-free commuter benefits in order to reduce financial burdens for low-income earners.

“Reduce the higher end (marginal) tax rate from the current 35% to 30% to synchronise it with the corporate tax rate for employees,” he said, while indicating “individuals don’t get relief for expenses unlike corporates”.

ICAM is also of the view that the threshold of marginal tax rate for employees be review from K2,550,001 to K6 million per month “since they are seen to pay tax at a rate higher than prevailing corporate tax”.

On broadening of the tax base, ICAM suggests to the Minister to formalise the informal sector — targeting online businesses and to expand presumptive tax band and raise awareness of the available options.

He added that growth in presumptive tax should be achieved through introduction of new higher band of up to K40 million at 3% tax rate and to introduce monthly payment options for presumptive tax to ease cash flow burden.”

He also suggested that the government should introduce some levies for public services, such as school fees and hospital fees to fund provision of essentials.

To improve tax compliance, the government is asked to enforce audits as well as settling tax arrears state-owned enterprises (SOEs).

Revenue optimisation can be achieved if corporate tax for import-substitute producers could be lowered to enhance investment in quality, thereby competing fairly.

He also suggested that use of digital tools for tax administration should be enhance through one ID for all taxes and to develop comprehensive taxpayer income profiles using National ID, Company Registry that can track individual’s income.

On agri-businesses, as enshrined in the MW2063 national vision; Agriculture Productivity & Commercialisation, the government should consider reducing corporate tax rates for this industry — especially those in value-addition category.

Introduction of incentives for mega farm projects with an export orientation, could boost investment allowances and enhance capital allowances on qualifying farm equipment as well as the introduction of tax holidays — or reduced business taxes at 20% and waivers for green energy and agriculture.

The agricultural industry is also being asked to invest or promote in organic fertilizer production to cut off imports that cost the economy a fortune in forex and that impactful mega farms operationalisation prioritise on crops planted, such as maize, rice and other high value crops including forestry with greater forex earning potential or import substitution.

ICAM also joined Malawi Confederation of Chambers of Commerce and Industry (MCCCI) in proposing that the threshold of 10% corporate income tax on business profits exceeding K10 billion in all sectors, be raised to K30 “to avoid being seen to penalise star performance as such businesses already pay higher taxes and are usually tax compliant”.

The government is also asked to promote green energy and natural gas as alternatives to fuel (compressed natural gas buses) and efficient, effective and functional mining regulatory framework — and to consider imposing high taxes on second-hand cars and clothes to support local industries — to optimise use of forex.

To ease congestion in urban centres, which demands for fuel and forex, the government should develop effective public transport and to consider introducing congestion charge in central business districts (CBDs) between 07:00hrs and 18:00 hrs on working days.

Parking lots should also be constructed in various access points to ease congestion on the side of the streets to align with the specific congestion charge between 07:00hrs and 18:00 hrs on working days.

These car parkades should be built by city and municipal councils to generate revenues in CBDs and outlaw street parking to improve traffic flow.

The body also asked government to combat corruption from misprocurement and use of blacklisted suppliers and systematic misuse of public funds as well as to address the issue of money laundering through acquisition of high value assets in cash, such as vehicles, land and houses.

Know your customer (KYC) systems must also be introduced when assets like vehicles are being procured while at the same time introducing lifestyle audits for government officials and employees of state-owned enterprises (SOEs).

ICAM affirmed “its commitment to supporting Government to achieve sustainable economic growth”, and stressed that “there is need for continued engagement with Ministry of Finance & Economic Affairs — both on policy formulation and implementation of the approved budget”.

“ICAM proposes that soon after budget presentation, there should be a forum where the citizenry are given an opportunity to analyse the budget; ask the Minister some questions before the Parliament start discussing the budget statement so that MPs are contributing effectively on technical matters including doing allocations that are pertinent for Malawi.

“ICAM proposes a multidisciplinary consultative committee comprising the major professional disciplines to engage key Government ministries, departments and agencies (MDAs) and the National Planning Commission (NPC) in the pursuit and implementation of the MW2063 vision.”

Other presentations, similar in nature that advocate for an investment budget, were made by Malawi Confederation of Chambers of Commerce and Industry (MCCCI), and Bankers Association of Malawi (BAM) while the floor was also given to other stakeholders.

In his closing remarks, the Minister of Finance said he was impressed with the level of participation at the Blantyre meeting, held at Sunbird Mount Soche, as well as the other two in Lilongwe and Mzuzu.

He assured that the contributions by the stakeholders — who are drivers of the country’s economy — would be consolidated in the 2025-2026 National Budget.

He applauded the stakeholders for being patriotic, participative and objective in their contribution, emphasising that his Ministry will continue to engage captains of the economy and all Malawians on issues of national economy.