Call for tax justice on Malawians – Centre for Social Concerns

The Centre for Social Concern (CfSC), a  Malawian research organization,  has called on authorities to exercise justice on Malawians when collecting and managing taxes in the country.

This is contained in a report titled ‘A day in the life of a Malawian tax payer’ which originated from a study which CfSC jointly conducted with the Malawi College of Accountancy (MCA).

CfSC says tax justice is one subject that most taxpayers often seek in their continued efforts of complying towards payment of taxation.

The centre said the research was hatched on the realisation that there is significant disparity between earnings of chief executives and the lowest paid member of the organisation.

It said Malawi has the highest pay gap which is 106.7, meaning that executives are earning 106.7 times more per month than the lowest paid workerstax_justice_now_560

“While tax authorities concentrate on raising more tax revenues by devising various measures aimed at increasing tax compliance, the question of who finally pays a particular form of tax and the effect of such tax on their incomes is usually not addressed.

“Usually the consumer pays all the taxes when he is buying goods and services. Unfortunately, most of such tax burden is borne by the poor. The poor pay most of such taxes as they use the same basic daily needs as the richer do. Effectively, this makes the tax rate for the poor more than the richer,” the report reads in part.

It said the study was undertaken with the aim of finding out what the daily taxes are for an individual when he wakes up from the bed to the time he goes to bed.

“Incomes of three individuals were used as a sample for the calculation. The incomes were from the following tax salary scales: the first one came from K45,000 to K89,000 per month. The second one came from K90,000 to K149,000 and the final bracket was from K150,000 to K200,000.

“From these tax brackets, it was established that taxes were regressive in nature if we consider daily consumption. The main reason for this injustice was because of the use of indirect taxes on basic needs consumed by people,” said CfSC.

The centre said the research also discovered that most of the taxes which individuals pay are indirect taxes which cannot be avoided because they are included in the cost of goods bought for daily livelihoods.

It noted that informal businesses do not pay taxes to the government as their information keeping is not very accurate, pointing out that government has not yet come up with measures to include these informal businesses so as to lessen the tax burden of the people who are formally employed.

The report has recommended that indirect taxes should be concentrated on items which are assumed to be luxurious goods as these would mean they will be taxes of choice and that the zero rated band should be increased from the current K15,000 to K45,000 in order to increase the disposable income for the low income earners.

It further says an extra tax band should be introduced for high income earners at 40 percent for income of more than K400,000 per month in order to compensate the loss of income for the government for increasing the zero rated tax band.

Government should take a bold step by zero rating all the basic needs so that only those that would consume the luxuries should be able to pay the indirect tax and introduce presumptive tax for small scale informal businesses.

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