Tax review relieves tobacco farmers

Tobacco farmers have hailed the two percentage points reduction in withholding tax levied on the leaf’s sales, saying it has boosted their take-home earnings.

Until the previous fiscal year, tobacco farmers were being deducted a refundable three percent withholding tax when they sell more than 10 bales or about 1 200 kilogrammes (kgs) of tobacco while those who were not meeting the threshold for paying income tax, were required to apply for a tax refund.

Minister of Finance and Economic Affairs Sosten Gwengwe announced the reduction from three percent to one percent to ease the burden, particularly on small-scale farmers.

With the new tax measure, it means tobacco farmers are no longer subjected to the three percent withholding tax, but are being deducted one percent final tax from their total sales regardless of quantity of tobacco.

Besides, tobacco farmers are also not expected to travel to Malawi Revenue Authority (MRA) offices to claim their refunds.

Speaking in an interview on Wednesday, Tama Farmers Trust president Abiel Kalima Banda said the tax cut has saved small-scale farmers time and money incurred to claim the refunds.

He said: “The money always went down the drain because most small-scale farmers have been unable to claim their refunds.

“Some farmers could not understand the refund process while others could incur more cost to claim their refunds and in due course they could make losses.”

Kalima Banda said the few farmers that understood what is required of them also benefited less as they had to pay the people they hired to make calculations for them.

Mangochi-based tobacco farmer Willard Mawindo said due to knowledge gaps, most farmers gave up on their refunds.

He said despite most of them receiving notices on withholding tax refunds, they ignored the same due to the cumbersome processes required to access the money.

“Apart from uplifting our livelihoods, the money is used to buy inputs such as fertiliser, pesticides and other materials for tobacco production,” he said.

Tobacco Commission spokesperson Telephorus Chigwenembe yesterday said the regulator continues to collaborate with relevant stakeholders in the industry to ensure that farmers understand the complex issues affecting their businesses, particularly on taxation.

“The issue of withholding is tax is one of the many issues that the commission has looked at with keen interest as it concerns farmers,” he said.

MRA marketing and communications manager Wilma Chalulu was yet to respond to our questions by press time at 6pm, but an insider at the tax collection agency admitted that most farmers lost their refunds due to complex processes required to claim of the money.

Said the insider: “Farmers would hire accounts to compile their financials which were used by us to compile their refunds.

“Our calculations, however, indicated that what was due was the one percent and two percent was what was refunded to the farmers.”

The official said the money went in the pockets of the accountant which the farmers hired.

“In the end, the farmers were left with nothing. This has indeed relieved farmers from losses,” he said.