ICAM PROPOSES KEY ADJUSTMENTS AT PRE-BUDGET CONSULTATION SESSION
The Institute of Chartered Accountants in Malawi (ICAM) has proposed significant reforms to shape the 2025-2026 National Budget during the Ministry of Finance and Economic Affairs’ pre-budget consultation session.
The event, held at Sunbird Mount Soche Hotel in Blantyre on 17th Jan 2025, was chaired by Honourable Simplex Chithyola Banda, Minister of Finance and Economic Affairs. ICAM’s Chief Executive Officer, CA. Noel Zigowa, presented a suite of recommendations aimed at fostering economic resilience, promoting equitable tax policies, and driving sustainable growth.
Noel Zigowa- ICAM CEO
Tax Reforms to address inflation and enhance equity
Acknowledging the growing economic challenges, ICAM proposed increasing the tax-free band for Pay-As-You-Earn (PAYE) from K150, 000 to K300, 000. This adjustment seeks to mitigate the impact of inflation on low-income earners and improve household purchasing power.
To further promote equity, the Institute recommended reducing the top marginal tax rate from 35% to 30%, aligning it with the corporate tax rate and addressing disparities in tax relief benefits between individuals and corporations.
ICAM also advocated for revising the threshold for the top marginal tax rate from K2, 550,001 to K6 million per month, ensuring fairer taxation across income levels.
Additionally, the introduction of tax-free commuter benefits was proposed to alleviate financial burdens on low-income earners who rely on public transportation.
Expanding the tax base and enhancing compliance
To bolster revenue collection, ICAM emphasized the need to formalize the informal sector, particularly targeting online businesses and small enterprises.
Expanding the presumptive tax band, the Institute suggested creating a new upper band for businesses with revenues of up to K40 million, taxed at a 3% rate. This move aims to improve compliance while offering monthly payment options to enhance cash flow for small businesses.
In support of effective tax administration, ICAM proposed leveraging digital tools, including integrating a unified taxpayer identification system linked to the National ID and the company registry. Such measures would streamline income tracking and compliance monitoring, reducing tax evasion.
Strategic tax incentives for economic growth
ICAM outlined a series of targeted tax incentives designed to catalyze growth in critical sectors:
- Agribusiness: Reducing corporate tax rates for businesses engaged in value addition, introducing tax holidays, capital allowances for farm equipment, and incentives for export-oriented mega farm projects.
- Import substitution: Offering reduced corporate tax rates to businesses producing quality import substitutes, fostering local competitiveness.
- Green energy and natural gas: Encouraging investments in green energy solutions and compressed natural gas initiatives to reduce reliance on traditional fuels.
Tackling urban congestion
To address increasing traffic congestion in Malawi’s urban centers, ICAM proposed introducing congestion charges during peak hours in central business districts (CBDs). This measure aims to ease traffic flow, reduce fuel consumption, and generate municipal revenue. The Institute also recommended constructing parking lots at city entry points to improve urban mobility by eliminating street parking and encouraging sustainable urban planning.
Strengthening governance and combating corruption
Recognizing the detrimental impact of corruption on economic development, ICAM called for stricter anti-corruption measures, including:
- Enforcing audits for state-owned enterprises and expediting the settlement of tax arrears.
- Conducting lifestyle audits for government officials and employees of state-owned enterprises.
- Implementing Know Your Customer (KYC) protocols for high-value asset acquisitions and blacklisting suppliers involved in corrupt practices.
Engaging citizens and advancing Malawi Vision 2063
To promote transparency and citizen involvement in national development, ICAM recommended establishing post-budget forums where citizens can provide feedback on budget implementation.
Additionally, the Institute suggested forming multidisciplinary committees to engage government entities in realizing the goals of the Malawi Vision 2063 (MW2063).
Minister’s commitment to stakeholder contributions
Honourable Minister Simplex Chithyola Banda commended ICAM and other stakeholders for their comprehensive and insightful contributions. He emphasized the importance of collaboration in driving Malawi’s economic growth and assured attendees that their inputs would inform the development of the 2025-2026 National Budget. The Minister reaffirmed the Ministry’s commitment to continued dialogue with economic players as part of its inclusive policymaking approach.
ICAM’ s dedication to economic progress
In conclusion, ICAM reaffirmed its commitment to supporting the government in achieving sustainable economic growth. The Institute underscored the value of collaborative policymaking and the importance of equitable economic policies in fostering resilience and prosperity in Malawi’s economy.
This consultative session stands as a testament to ICAM’s proactive role in shaping policies that address contemporary economic challenges while laying a strong foundation for long-term growth.
Editor-in-Chief