Ministry of Agriculture, Irrigation and Water Development has assured smallholder tobacco farmers who were deducted withholding tax that they will be reimbursed their money.
During the opening of Tobacco Marketing Season in Lilongwe in April, President Peter Mutharika directed that small-scale tobacco growers whose leaf volumes are below 1 200 kilogrammes (kg) should not be deducted three percent withholding tax to ensure that they get more returns on their investment.
The ministry’s Principal Secretary Grey Nyandule Phiri said the ministry officially communicated the directive to all stakeholders.
“Growers who were deducted withholding tax should not worry, they will be refunded. It is a simple issue,” he said.
Felix Thole, chief executive officer of Tobacco Association of Malawi (Tama), the largest grouping of tobacco growers, confirmed to have received the directive from government.
He, however, said the association is yet to monitor this week whether there is full compliance with the order.
Said Thole: “All officials who were involved in the discussion on how best to implement the order agreed that the smallholder farmers must now be exempted from withholding tax deductions.
“What is happening is that those farmers that registered with the Tobacco Commission and were given a quota of not more than 1 200 kilogrammes and below should not be deducted withholding tax and those above the threshold, withholding tax should apply.
AHL Group public relations manager Teresa Ndanga confirmed that they complied with the presidential directive and that all qualified small- scale farmers were being exempted deductions.
On his part, Tobacco Commission corporate planning and development manager HellingsNasoni said: “The commission being the implementer of government policy in the tobacco sector is always on top of everything, including the withholding tax exemption directive.”
Tax expert Emanuel Kaluluma yesterday faulted the tax arrangement, saying a good tax system does not discriminate.
He said: “The truth of the matter is that our tax threshold of K420 000 or K35 000 per month is about poverty line regardless of the source of income and it should not apply to tobacco crop only.”
Earlier, National Association of Smallholder Farmers (Nasfam) chief executive officer Betty Chinyamunyamu called for the gazetting of the directive so that it should not be reversed in future. n