The Zimbabwe Revenue Authority (Zimra) has said tobacco farmers should comply with the tax laws by having tax clearance certificates, adding that the 10% withholding tax was not targeting only farmers.
BY BUSINESS REPORTER
Last week, Zimra told the Tobacco Industry and Marketing Board (TIMB) to deduct 10% withholding tax on farmers without tax clearance certificates causing an uproar as the tobacco farmers felt they had not been consulted.
Zimra board chairperson Willia Bonyongwe said the tax authority had not introduced a new tax, but was on a drive to ensure compliance with existing legislation.
Withholding tax was introduced in 2004 to enhance tax compliance and applies to all registered taxpayers.
“A reminder was sent to the auction floors and other tobacco buyers, as per existing legislation, to remind them that when you trade with people without tax clearance then you must withhold 10%. This was is in no way targeted to farmers; most wholesalers, manufacturing, mining companies have received the same letter now and again,” Bonyongwe said.
“The purpose is to bring more people in the tax net. Zimra is on a drive to enforce compliance. The only way the rate of tax can come down is if everyone pays their bit.”
She said there were prescribed thresholds for paying tax adding that “there are people who earn very little, but contribute monthly to the fiscus and their burden could be lessened if the number of taxpayers increases”.
Bonyongwe said due to misunderstanding, there were consultations taking place with all stakeholders as “most people sincerely thought there was a new tax” which cannot be introduced without any new legislation.
“Zimra is an implementing agent for government and whatever is decided is what will be implemented. There is no new tax and Zimra was just trying to enforce compliance. Our plea is for people to voluntarily comply with the tax laws as it would greatly improve service delivery and reduce even budget deficit,” she said.
Farmers’ associations pushing for the reversal of the tax say it will burden the grower, who faces high input, labour and finance costs and other taxes, levies and makes tobacco growing uncompetitive.
Farmers’ unions say the tax negates the various incentives that the government and Reserve Bank of Zimbabwe have put in place to incentivise tobacco growers through a 5% export incentive scheme and reducing the costs of doing business.
Tobacco is one of the country’s largest foreign currency earners, raking in nearly $1 billion last year. Output is expected to reach 205 million kilogrammes this year from 202 million kilogrammes realised in 2016.