‘Withholding tax ripping off farmers’
Rab Processors Limited, one of Malawi’s buyers of farm produce, has warned that farmers may continue suffering unless government removes withholding tax on farm produce.
The company’s deputy managing director, Ahmed Sunka, said in an exclusive interview this week that withholding tax is disadvantaging farmers; hence, called upon government to review the policy.
Explained Sunka:“To buy produce from farmers, we’ve to deduct three percent withholding tax. In so doing, government is subsidising them [through the Farm Input Subsidy Programme] on the one hand and taxing them on the other.”
Sunka’s concerns were last year voiced by a group of farmer-based organisations and the civil society organisations (CSOs) who said government’s decision to introduce withholding tax on farm produce is defeating efforts to promote smallholder farmers in country.
The concern forced organisations to write government stating that withholding tax is contradicting the Farm Input Subsidy Programme (Fisp) whose key objective is to alleviate poverty among smallholder farmers.
The organisations include Farmers Union of Malawi, National Smallholder Farmers Association in Malawi, Civil Society Agriculture Network, Malawi Confederation of Chamber of Commerce and Industry (MCCCI) and Malawi Economic Justice Network (Mejn).
They argued that smallholder farmers do not have the capacity and resources for maintaining tax files and claim back withholding tax deducted from their income.
“This withholding tax is counter-developmental and does not promote capacity building. For instance, if a farmer sells his produce in a rural market, there is no withholding tax applicable. However, if the same farmer chooses to band a few smallholder farmers together or individually ferries produce to the urban areas and sell to formal companies, withholding tax is deducted,” their petition read in part.
They further stated that the tax would encourage unscrupulous ‘middle men’ who buy produce from farmers cheaply in rural areas.
Ministry of Finance spokesperson, Nations Msowoya, said this week the ministry received the letter and that government would revert to the concerned farmer-based organisations once it concludes reviewing their concerns.
Small-scale farmers account for more than three-quarters of total agricultural production and over half of its marketed production, according to the 2013 World Bank report.
