THE Tobacco Industry Marketing Board (TIMB) has engaged the Finance ministry seeking clarity on the payment of value added tax by contract farmers following the enactment of a new law exempting the farmers from paying value added tax (VAT).
Report by Victoria Mtomba
It is understood that confusion has emerged after the government enacted Statutory Instrument (SI) 81 of 2013 on June 7, 2013 with a retrospective effect dating back to February this year.
In an interview with NewsDay yesterday, TIMB chief executive officer Andrew Matibiri said the tobacco industry regulator was in talks with Treasury following reports that the country’s tax collector, Zimbabwe Revenue Authority (Zimra) was demanding tax from contract farmers.
According to the SI with effect from February 1, 2013, the exemption on tobacco sold on the auction floors was extended to include tobacco not sold on the auction floors such as tobacco sold under contract farming.
“We have already started the motion because Zimra was following farmers and claiming that they should pay. But from our investigations, no farmer has paid VAT, but we just want to make sure that the legalities are in order,” he said.
Experts say this may create problems for farmers that have already paid the tax.
International auditing and advisory firm Price Waterhouse Coopers in its latest tax newsletter said: “The question is whether the growers registered for VAT should amend and resubmit value added tax returns for the period February to May 2013.
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“The problem is that tobacco transactions would have attracted VAT in terms of prevailing regulations during the intervening period while amendment is basically contradicting that position by imposing an exemption for the period in question.”
Meanwhile, the country has earned $565 million from an output of 153 million kilogrammes of the golden leaf according to figures from TIMB.
The golden leaf was being sold at an average price of $3,70 per kilogramme.
The figures showed that contract farming contributed $380 million to total sales while the auction floors contributed $185 million. Contract farmers contributed 110 million kg of the group in the 89 days while auctions contributed 52 kilogrammes.
