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Finance Minister Goodall Gondwe on Friday reduced and abolished various taxes in his tax reforms for the 2006-2007 budget pegged at K138.7 billion with revenue and grants of K134.7 billion which creates a deficit of K4 billion.
The budget has allocated K89.96 billion on recurrent expenditure while K48.1 billion is expected to be spent on development projects. Domestic revenue has this year been estimated at K78.1 billion.
The budget has also increased MPs’ subsistence allowances from K8,000 to K12,000 per day which attracted an applause from both sides of the House.
It has also introduced pension reforms which would see pensioners getting up to K60,000 from K13,000 per month after 30 years of service with an average three-year salary of K100,000 which, he said, would bloat the pension budget from K3.2 billion to K12 billion.
Among other tax reforms, Gondwe has increased from K5,000 to K6,000 the amount of salary which will not be subjected to Paye-As-You Earn (PAYE) income tax and has reduced the top tax rate bracket for individuals from 35 to 30 percent “to be in line with neighbouring countries”.
The budget has also abolished minimum turnover tax for companies, exercise duty on passenger carrying buses with a seating capacity of more than 12 persons and custom duty for industrial generators above 375 KVA which are treated as capital imports.
It has also removed 60 percent duty on contact lenses solution and also abolished Value Added Tax (VAT) for pharmaceutical products, wheel chairs and for petrol and diesel lorries with gross weight of above three tonnes.
The budget has also increased from K5,000 to K50,000 duty-free allowance for wedding presents for couples who wed abroad and receive gifts and it has also increased the nominal value for duty importation of postal parcels from K2,000 to K20,000.
Gondwe has also reduced concessionary customs duty rate from 15 percent to 10 percent and has expanded the Customs and Exercise Industrial Rebate Schedule by including electricity generating and gas distribution industry, public sewage disposal works and the public water supply.
But the tax reforms have increased duty on bottle coolers from five percent to 25 percent and introduced a 20 percent excise duty on them to bring them in line with refrigerators.
Gondwe also announced that companies will not pay tax on capital gains from selling assets provided the funds are reinvested in assets of greater cost and of similar type. He has also announced a reduction in effective burden on capital gains tax from 18 percent to 15 percent.
Gondwe said the income taxes and VAT will be effective July 1 while Customs and Exercise measures would become effective from yesterday midnight.
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