Punitive taxes choking Malawi milk producers
Local milk producers under Malawi Milk Producers Association (MMPA) are worried with “punitive” taxes on dairy products and equipment, which it says has choked most ordinary milk producers.
MMPA national director Herbert Chagona said in an interview on Monday that subsistence dairy farmers are now discouraged from selling their milk through the formal channel due to tax on milk and other milk-related products.
Of all agricultural products from subsistence farmers in Malawi, milk is the only produce subjected to three percent withholding tax at milk bulking group level.
In addition, dairy supplies such as dairy equipment, veterinarian drugs, semen, among others, that are imported into the country attract a 16.5 percent value added tax (VAT).
“With limited supply of milk at the milk bulking group, subsistence dairy farmers are discouraged from selling their milk through the formal channel level, which is already affected by low prices offered by milk processors.As a result, farmers resort to vending the milk,” explained Chagona.
He said proceeds from milk do not belong to the bulking group, but to individual farmers.
Chagona said taxes on milk and related products “do not make sense” as the measures are simply chasing away farmers from bulking their milk.
He said since the rates are applied on the gross amount that is due to a bulking group, dairy farmers do not enjoy the thresholds, rendering their tax burden higher than other businesses.
“As the three percent withholding tax is discouraging dairy farmers from bulking their milk at a cooling centre, it is high time the three percent withholding tax on milk was removed to provide enabling environment for dairy farmers to be in line with farmers of other agricultural products such as maize and groundnuts,” said Chagona.
By removing the tax, he said, the move would increase milk volumes in the formal sector and graduate from the current Malawi consumption level of five litres per person per year or just one table spoon per person per day.
The five litres milk per-capita consumption in the country is against a recommendation by the World Health Organisation (WHO), which states that for a healthy diet, a person should consume 220 liters per annum.
Dairy experts say there are other overarching problems that are holding back the development of the dairy industry in Malawi, including lack of available dairy cows, poor feeding practices and inadequate training or extension services.
Director in the Department of Animal Health and Livestock Development in the Ministry of Agriculture, Irrigation and Water Development Bernard Chimera toldBusiness Review that government is reviewing some outdated legislation such as the Milk Act, which he said would move towards addressing some challenges currently gripping the dairy sector and also improve milk consumption levels.
