Source: Tobacco: Mthuli’s go-between pays off | The Herald April 2, 2019
Elita Chikwati Senior Reporter
The intervention by Finance and Economic Development Minister Professor Mthuli Ncube has paid off, with activity at the tobacco auction floors picking up yesterday as more farmers have started delivering their crop following the removal of the 2 percent tax from all transactions involving the crop.
At the close of last week, Prof Ncube promised to play a go-between in farmers’ and Government face-off following a slow start to the tobacco marketing season, with farmers withholding their crop due to low process and regulatory issues.
But it all changed following the fiscal authorities’ intervention.
During his tour, Prof Ncube confirmed the scrapping of the 2 percent tax and said he wanted maximum benefit to go to farmers, the country’s biggest foreign currency earners.
And Government Statutory Instrument 80 of 2019, which amended the Finance (Rate and Incidence of Intermediated Money Transfer Tax) Regulations, 2019 was announced last Friday, scrapping Intermediated Money Transfer tax, better known as 2 percent tax, from all transaction for the purchase of auction tobacco under statutory instrument 80 of 2019.
“It is hereby notified that the Minister of Finance, has in terms of Section 3 of the Finance Act made the following regulations; the thirtieth schedule (Intermediated Money Transfer Tax) in the Income Tax (Chapter 23.06) is amended in paragraph 1,” the Gazette said.
“The transfer of funds for the purchase of auction or contract tobacco from buyers or contractors to auction floors and the transfer of funds by contractors and auction floors to growers of tobacco for deliveries of tobacco.”
Tobacco stakeholders have been calling for exemption from the two percent tax since the opening of the auction floors on two weeks ago as it was eroding farmer’s earnings.
Some farmers told The Herald yesterday that they could not sell their crop during the first week as they wanted to understand the payment modalities first.
Rusape farmer, Mr Tongai Muchemenyi said he brought his crop yesterday because of the removal of the two percent tax.
“It seems all systems are in place now. The prices are still low but we expect them to start improving,” he said.
Other farmers said they were now selling their crop as they needed cash for Easter and Independence holidays. Informal traders also said business had been low during the first days and they were now bringing their wares to the floors.
Meanwhile, tobacco sales have continued to increase although they are still below the volumes sold during the same period last year.
Farmers have so far sold 538 147 kilogrammes of tobacco worth US$896 166 compared to 6,8 million kilogrammes worth US$19 million.
The highest price at the auction floors has remained at $4,50 per kilogramme. This is a decline from the $4,99 per kilogramme that has been offered by buyers at t auction floors for the past years. Contractors have continued to pay higher prices with the highest pegged at $5,78 per kilogramme.