Tax reduction on tobacco sales excites farmers

The 2022/23 new tax measures have brought a sigh of relief to small-scale tobacco farmers in the country with the reduction of Withholding tax from 3 percent to 1 percent final tax. 

Tobacco farmers were being deducted a refundable 3 percent withholding tax from auction floors when they sell more than 10 bales or 1, 200kgs quantity of tobacco. The farmers who did not meet the threshold for paying income tax were required to apply for a tax refund. Due to several challenges, the process to receive the refund delayed and famers cried foul.

However, during his budget presentation on Friday 18^th February 2022, Minister of Finance Honourable Sosten Gwengwe announced the reduction saying it is meant to ease the burden on farmers. 

“To ease the burden of travelling and the amount of tax that tobacco farmers pay, Government has decided to reduce the withholding tax rate from 3 percent to 1 percent and make the tax final,” said Gwengwe.

This means that tobacco farmers will no longer be deducted 3 percent withholding tax as it were but rather they will just be deducted 1 percent final tax from their total sales regardless of quantity of their sales. Consequently, farmers will no longer be travelling to MRA offices to claim their refunds.

Tobacco Association of Malawi (TAMA) Farmers Trust, a representative body of all tobacco farmers, says the reduction in Withholding tax on tobacco sales will provide relief to small-scale farmers.

TAMA Farmers Trust Communications Officer Sam Kalimba commended Government for addressing farmers’ concerns.

“It has always been a call from farmers asking the Government to reduce Withholding tax on tobacco sales or introduce a reduced non-refundable tax considering that production cost is already high. This is the answer that farmers have being waiting from the Government for a long time now,” said Kalimba.

He added that most small-scale farmers have been unable to claim their refunds. He said this has been the case because 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.

The 2022/23 national budget titled “Accelerating Implementation Towards Wealth Creation, Job Creation and Food Security” is expected to address numerous issues with regard to taxation.

BY NAPO SIMKONDA