National Association of Smallholder Farmers in Malawi (Nasfam) has asked government to gazette the removal of three percent withholding tax on tobacco proceeds from less than 10 bales to avoid its reintroduction.
This follows the announcement by President Peter Mutharika last Thursday at Lilongwe Floors during the opening of this year’s Tobacco Marketing Season that government will remove the tax as tobacco growers play an important role in the economy; hence, their efforts have to be appreciated.
Betty Chinyamunyamu chief executive officer of Nasfam, which has a membership of more than 300 000 farmers, said in an e-mail response on Tuesday that most of its members produce an average of five bales per annum and sell their leaf under a club unlike large-scale farmers who sell as individuals.
She said: “This announcement that this three percent withholding tax will no longer apply for smallholder farmers selling less than 10 bales is
welcome news, but we are calling on government to have this removal as a permanent measure and not a temporary one or one that will only apply this season.”
Business Review understands that over the past years, levies and fees on tobacco proceeds have been one of the highly contentious issues, with tobacco growers complaining that they are being over-burdened.
Currently, tobacco growers are subjected to classification levy, research levy, Tobacco Commission (TC) levy, farm to satellite depot fee, association fee, withholding tax and hessian levy.
But Chinyamunyamu said withholding tax is not a tax per se, but it is a way of facilitating the full or partial advance payment of an individual’s final tax liability.
In Malawi, figures show that many smallholder farmers grow tobacco on less than a hectare and in turn get an output of less than 10 bales.
The difference between smallholder farmers and large-scale farmers is their landholding sizes and consequently their production output as well as the final amount of income they derive from their farms.
Ministry of Agriculture, Irrigation and Water Development Principal Secretary Grey Nyandule-Phiri declined to comment, referring the matter to Tobacco Commission CEO Kayisi Sadala, who said they have noted the suggestions from Nasfam.
“There will be need for further consultations,” he said briefly.
In 2005, tobacco growers were also relieved from paying seven percent withholding tax following the removal of the tax.
However, such a removal was short-lived as government later reintroduced the tax but at a lower rate of three percent.
Tobacco is one of the country’s important cash crops, contributing about 60 percent of foreign exchange earnings and about 13 percent to the national economy.