Zim scraps 10% tobacco tax five days after introducing it

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The Zimbabwe government recently withdrew a tobacco tax less than a week after its introduction. The 10% tax on tobacco was imposed on 31 March and scrapped on 5 April.

Zim scraps 10% tobacco tax five days after introducing it

Introduced without consultation, the levy was targeted at growers who did not have tax clearance certificates.

Farmers strongly opposed the tax, denouncing it as an ambush that would adversely affect their businesses. One of their fears was that the government would extend the tax to other crops in an economy where farmers are some of the least taxed enterprises.

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One of their fears was that the government would extend the tax to other crops in an economy where farmers are some of the least taxed enterprises.

Following the outcry, Finance Minister Patrick Chinamasa and Agriculture Minister Joseph Made met in Harare on 3 April to find common ground but failed to reach an agreement. After consulting with fellow ministers at the weekly cabinet meeting, they met again on 5 April and agreed that the levy would be dropped.

After consulting with fellow ministers at the weekly cabinet meeting, they met again on 5 April and agreed that the levy would be dropped.

Announcing the scrapping of the levy afterwards, Made urged tobacco farmers to continue delivering their crop to auction floors.

“I am pleased that we have amicably resolved the matter and reached an agreement that is expected to satisfy farmers and the Zimbabwe Revenue Authority [Zimra]. Farmers should not blame Zimra as it was working within the confines of the law.  Farmers should go on with their business,” he was quoted as saying in the official press.

Vice-president of the Zimbabwe National Farmers’ Union, Garikayi Msika, said that the government should consult farmers before taking decisions that affected their operations.

“In this case, we were never advised before the tax took effect, which is bad for business. However, we are happy that there was a swift correction,” he said.

Wonder Chabikwa, president of the Zimbabwe Commercial Farmers’ Union, said that the reversal had been “a good decision”.

“I said when the tax was introduced that it was bad for agriculture and bad for the economy as a whole.  It caused much anxiety among our members but we are pleased the government agreed with us and scrapped it.  The tax was going to create a class of middlemen who have tax clearance certificates offering to sell farmers tobacco on their behalf.  They were going to charge the farmers for this service.”

The withdrawal of the tax came two months after Chinamasa was forced to drop a value-added tax he had imposed on meat and grain after a nationwide outcry.

 

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