FACULTY OF SOCIAL SCIENCE

DEPARTMENT OF ECONOMICS

COURSE TITLE : PUBLIC FINANCE

COURSE CODE : ECO 3105

FROM : GROUP 7 MEMBERS

CHANCY KAGWAMMINGA (BSOCDS/NE/2022/1328)
JUDITH MHONE (BSOCDS/NE/2022/O872
DESIRE KAMPOTE (BSOCDS/NE/2022/O857)
ALINAFE FORTUNE GALAFA (BSOCDS/NE/2022/0852)
DAVID NYONI (BSOCECO/NE/2022/0956)
EVANCE THANGALIMODZI (BSOCECO/NE/2022/0960)
SYMPATHY BANDASON (BSOCDS/NE/2022/0840)
PRISCA MAENI (BSOCDS/NE/2022/0866)

TO : MS. SEYAMA

ASSIGNMENT : GROUP ASSIGNMENT 2

DUE DATE : 29TH APRIL 2024

COMPARING THE TAXATION SYSTEM OF SOUTH AFRICA AND ZIMBADWE TO
THAT OF MALAWI

Taxation system is the process by which governments impose charges on individuals or entities
to fund public expenditures (Smith, 2020). It involves various forms of levies such as income
tax, sales tax, and property tax to finance government operations and services. There are
different reasons why taxation system is the process that is almost conducted in all countries in
the world. Revenue is generated through taxes to provide funds to the government for financing
public services and infrastructure such as education, healthcare, transportation and defense. The
administration of tax in Malawi is placed in the hands of The Malawi Revenue Authority
(MRA), the administration of tax in South Africa is placed in the hands of The South African
Revenue Service (SARS) and in Zimbabwe tax administration is placed in the hands of
Zimbabwe Revenue Authority (ZIMRA). MRA, SARS and ZIMRA are government agencies
responsible for assessment, collection and accounting for tax revenues in the three. Tax
collection also regulates control, stimulates economic activities, social and economic stability as
well as redistribution of wealth (Alesina, 1996). There are several similarities and differences in
taxation system among these countries of Malawi, Zimbabwe and South Africa.

To begin with types of taxes that are found in Malawi, Zimbabwe and south African are as
follows, personal income tax, corporate income tax, value added tax(VAT), custom duties and
exercise taxes. The types of taxes mentioned above are grouped into direct and indirect taxes.
Direct tax is the tax that is paid directly to the government and the burden of paying cannot be

easily shifted to someone else while indirect tax is the tax that is added to the price of goods and
services and they are paid when buying something.

Personal income tax is the direct levied tax on personal income including wages and salaries,
director’s fees, dividends, royalties and rental income, among others (Adam, 2001).

Value Added Tax (VAT) is a consumption tax levied on the value added to goods and services at
each stage of production or distribution. It is based on the increase in value of a product or
services at each stage of the supply chain, from raw materials to the final sale to the consumer.
Businesses collect VAT on behalf of the government, and it is ultimately borne by the end
consume (Smith T. , 2021).
 Customs duty refers to a tax or tariff imposed on goods when they are transported across
international borders. It’s a form of indirect tax collected by customs authorities in a country on
imports and, sometimes, exports. The purpose of customs duty is to raise revenues for the
government and to protect domestic industries by making imported goods more expensive.
(Organization(WCO), 2013).

There is also corporate income tax which is direct tax imposed by a jurisdiction on the income
or profit of corporations and analogous legal entities, the tax rate can vary by countries by
region. The taxable income for corporation is generally calculated as the gross receipts of a
business minus allowable deductions which may include costs of goods sold, business expenses,
marketing costs and more (Willian, 2015).

There are also some similarities of the taxation systems amongst the three countries (South
Africa, Zimbabwe and Malawi). Progressive tax system is one of the similarities, whereby it is
designed to distribute the tax burden more equitably based on one’s ability to pay. In Zimbabwe
and Malawi, progressive tax rates typically involve multiple tax brackets, where higher income
levels are taxed at increasing rates. South Africa follows a similar model, with a progressive tax
system that includes various tax brackets and rates. Overall, the aims is to promote social equity
and ensure that those can afford to contribute more do so through the tax system. (MRA, 2018).
A progressive tax system helps to reduce inequality by imposing a lower tax rate on low income
earners and higher tax rate on those with higher income. This type of tax system is also
supported by most people as it tends to be fairer and more reasonable. Additionally a progressive
tax system tends to collect more taxes than flat taxes or regressive as the highest percentage
of taxes is collected from those with highest amount of money(Smith. 2020).

There is also tax year consideration which is the period of time for which a taxpayer calculate
their income, expenses, deductions, and tax liabilities. The tax year may coincide with calendar
year( January1st to December 31st) or it may be a fiscal year which can vary depending on
the individual or business a counting cycle (Doe, 2023). The importance of tax year
consideration includes: Financial planning; which explains that tax year provides a framework
for financial planning, allowing taxpayers to time income and deductions to optimize their tax
situation. The other one is compliance; it ensures that taxpayers comply with the law by
reporting their income and calculating taxes due within a specific period. More to that,
government revenue; the tax year is crucial for government revenue collection, enabling the
government to forecast and budget for public expenditures. In addition, strategic Decisions;
Business and individuals can make strategic decisions regarding investments, expenditures and
retirement savings based on tax year (age, 2024).

There is also exemption threshold taxation system is a tax policy where individuals or entities are
exempt from paying taxes up to a certain income or profit level. Beyond this threshold, they are
subject to taxation on the portion of income or profit exceeding the threshold (Freedman, 2017).
There are some significance of exemption threshold whereby it encourages Compliance,

Exemption threshold taxation systems can encourage compliance by simplifying tax filing for
low-income individuals and entities, reducing the administrative burden on both taxpayers and
tax authorities, it also reduces Tax Burden, By exempting a portion of income or profit from
taxation, these systems help alleviate the tax burden on lower-income individuals and small
businesses, promoting economic equity and social welfare (Levin-Waldman, 2017).Promotes
Economic Growth: Exemption threshold taxation systems can stimulate economic growth by
providing incentives for entrepreneurship and investment, especially among those who might
otherwise be deterred by high tax rates. Enhances Progressivity: They contribute to a more
progressive tax system by ensuring that those with lower incomes are not unfairly taxed, thus
helping to mitigate income inequality.

There is review of some differences in taxes In South Africa, the tax system operates on a
progressive scale, meaning that individuals with higher incomes pay a higher percentage of tax.
As of my last update, the tax rates for individuals in South Africa for the tax year 2023/2024
were as follows: 18% on taxable income up to R205, 900. 26% on taxable income from R205,
901 to R321, 600. 31% on taxable income from R321, 601 toa R445, 100. 36% on taxable
income from R445, 101 to R584, 200. 39% on taxable income from R584, 201 to R744, 800.
41% on taxable income from R744, 801 to R1, 577,300. 45% on taxable income above R1,
577,301. In Malawi, the tax system also operates on a progressive scale (Jame, 2016). As of my
last update, the tax rates for individuals in Malawi for the tax year 2023/2024 were as follows:
0% on taxable income up to MK 200,000. 30% on taxable income from MK 200,001 to MK
3,000,000. 35% on taxable income above MK 3,000,000. In Zimbabwe, the tax system also
follows a progressive scale. As of my last update, the tax rates for individuals in Zimbabwe for
the tax year 2023 were as follows: 0% on taxable income up to US$720. 20% on taxable income
from US$721 to US$3,600. 25% on taxable income above US$3,600. There is also tax
administration systems in Malawi, South Africa, and Zimbabwe differ in various aspects such as
enforcement mechanisms, compliance procedures, and levels of transparency. Malawi's tax
administration faces challenges in effectively enforcing compliance due to a large informal
economy and limited resources. South Africa's tax system is known for its complexity, but it also
has relatively strong enforcement mechanisms. Zimbabwe struggles with issues of corruption
and lack of transparency in tax collection. Here's an APA-style reference for further reading (Doe
j. &., 2012), there is difference in corporate rate where Zimbabwe: The 25% corporate tax rate is
the highest tax bracket for companies in Zimbabwe. However, companies with taxable income
below certain thresholds may be subject to lower rates, such as 15% or 20%. In addition,
Zimbabwe has a capital gains tax of 20% on the sale of assets such as property, shares, and
business interests. Malawi: The 30% corporate tax rate applies to companies with taxable income
over approximately. South Africa: The corporate tax rate in South Africa is 28% (South African
Revenue Service, 2023). In addition to the corporate tax rate, South Africa has various other
taxes that companies may be subject to, such as payroll tax, skills development levies, and
transfer duties (MRA Z. &., 2022).
References
Adam, W. (2001). What makes the personal Income tax progressive? A comparative Analysis for
Fifteen OECD countries . Kluwer Law Academic Publishers.

age, A. (2024). 5 Ways to Prepare For The New Tax Year. Retrieved from A. Accountancy Age
5: http://www.accountancyage.com

Alesina, A. &. (1996). Fiscal Discipline and Budget. African Economic Review, 86(2), 401-407.

Doe, j. &. (2012). A comparative Analysis of Tax Adminitration System in Malawi, South
Africa & Zimbambwe. Jounal of Tax Administation .

Doe, J. (2023). Understanding Tax Year Considerations: implications for individuals and
Businesses . Journal of Accounting , 12(2),78-91.

Freedman, J. (2017). Understanding Taxation . Routledge.

Jame, T. (2016). Tax Rate Percentages and Brackets. University of Zambia.

Levin-Waldman, O. (2017). American government: A foundation overview. Riutledge.

MRA. (2018). Taxation in Malawi . Lilongwe: MRA office.

MRA, Z. &. (2022). Corporate Tax Rate, Social Economic policy. Ecomic Financial policy
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Organization(WCO), W. C. (2013). Customs Duty taxes, Policies of Economic Development.

Univestry of South Africa.

Smith, J. (2020). The Importance Of Progressive Taxation in Reducing Income Inquality .

Journal of Economic Studies, 17(3).45-60.

Smith, J. (2020). Understanding Taxation: Acomprehesive Overview. Taxation Journal,

15(2).123-145.

Smith, T. (2021). Understanding Value Added Tax: Principles & Applications. NewYork : NY:
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Willian, S. (2015). Corporate Income Tax of Different Nations in Africa. Lusaka.