eBusiness Weekly
Martin Kadzere
Zimbabwe’s cotton producers are seeking to be spared from paying 10 percent withholding tax, arguing that it is eroding their earnings, an industry official has said.
The Zimbabwe Revenue Authority (ZIMRA), seeking to boost its revenues, has directed that cotton merchants deduct 10 percent tax on raw cotton sales this season. This is a different scenario from maize and tobacco farmers, who are exempted.
Already, the cotton marketing season is coming to an end with about 66 million kilogrammes of cotton having already been sold out of the 68 million kg expected.
Since the majority of farmers have already been paid, the merchants might be forced to fork out money to pay Zimra now and deduct from farmers’ earnings next season.
Cotton Producers and Marketers Association Steward Mubonderi, told a Parliamentary Portfolio Committee on Lands, Agriculture, Water, Climate and Rural Resettlement on Tuesday that Zimra should spare the farmers given their vulnerability nature.
“The majority of them are benefiting from Free Presidential Programme and their earnings are as little as $600 (per bale),” said Mubonderi.
“We are (therefore) appealing to the committee to intervene so that this situation is reserved,” he said.
In an interview, Mubonderi said the situation would even be worse if cotton companies decide to carry the burden.
“If the companies decide to pay, this will definitely affect funding preparations for next season,” said Mubonderi.
Apart from Cottco, which administers the government scheme, private players are also affected.
“The situation we have here is of a Government trying to help the vulnerable households while on the other hand, a Government entity taking from the poor people. As farmers, we don’t think it is a proper way of doing things,” Mubonderi said.
At an average price of $2,47, cotton companies might need to fork out as much as $17 million to pay Zimra. No comment could be obtained from Zimra and the Ministry and Finance and Economic Development by the time of going to print yesterday.
However, Business Weekly is reliably informed that the authorities are insisting that the 10 percent is statutory requirement and cotton companies should find a way of paying.
Zimbabwe cotton season is coming to an end with companies mopping up the later crop, particularly in the Lowveld, which received late rains.
The severe drought that was experienced across southern African region has significantly affected output, with production set to decline by 52 percent, according to official figures. Output will be the lowest in two seasons to about 68 000 tonnes 142 000 tonnes last year and 74 000 tonnes in 2017, AMA acting chief executive Ms Nancy Zitsanza said while giving oral evidence before the same Parliamentary Portfolio Committee.
“Production was affected by the drought, which we experienced this past production year,” she said.
The drought also affected maize output, which dropped by 54 percent to 776 635 tonnes, forcing the Government to revise its growth targets. The Government introduced the scheme to save the industry that faced imminent collapse after farmers abandoned cotton citing poor prices and low levels of funding.
Introduced in 2015, the free input scheme has helped production to increase from 28 000 tonnes, the lowest output in nearly two decades to about 142 000 tonnes last season. At peak Zimbabwe produced 352 000 tonnes of raw cotton in 2012.
