Tobacco merchants have suspended purchases of the crop this
year, demanding an exemption from paying the 2% tax on intermediate
transactions, Standardbusiness has learnt.
According to industry sources only four out of the 32
registered merchants participated in the first two days of tobacco sales, which
were punctuated by low participation of growers as well. Growers are also angry
with the payment methods and the currency that is being extended for payment.
Boka Auction Floors did not trade for the first two days of
the marketing season, while two contracting firms, Mashonaland Tobacco Company
(MTC) and Curverid, have pushed forward their opening dates to April 1 until
the pressing issues are addressed.
The tobacco marketing season officially started last
Wednesday with auction floors opening for trade, while contract floors were
expected to commence on Thursday.
Tobacco associations and merchants have since requested
audience with the central bank governor seeking resolution of the issues.
“We had a meeting with the Reserve Bank of Zimbabwe (RBZ)
yesterday (Thursday) and merchants are saying we are bringing money in USD so
why punishing us with this tax. As you know, tobacco is sold in foreign
currency but current RBZ exchange control regulations require merchants to
liquidate their foreign currency on the market so that they purchase tobacco in
RTGS$. The tax is an extra cost to them considering that most of them use
borrowed funds to finance the purchase of tobacco and cannot easily negotiate
the prices of tobacco with the final offtake so as to absorb the additional
cost from the 2 percent intermediate tax,” Bullion Leaf managing director
Persistence Gwanyanya said.
“As you have seen, prices so far are not good at all
because big merchants are not on the market. The RBZ governor (John Mangudya)
said he was going to engage with Finance minister Mthuli Ncube since it was a
fiscal issue. ”
The 2 cents per dollar tax imposed by treasury last year
applies to transactions of $10 and above. There is a cap of $10 000 on the
amount of tax to be paid with transfers above $500 000 attracting a flat tax of
$10 000.
Statistics from the Tobacco Industry and Marketing Board
show that the highest price which was offered on the auction floors dropped to
$4,50/ kg from $4,99/kg last year.
The average price on the first and second day of the sales
was $1,83/kg and $1,46/kg, respectively, much lower than the $2,22/kg which was
achieved on both days last year.
Trade on the other two floors dipped 97% and 64%,
respectively, during the first two days of the buying season as compared to
last year with only 59,134kg being traded compared to 684 786kg last year.
Another tobacco associative executive confirmed that
merchants were pressing the RBZ for a solution.
“Yes, we met yesterday (Thursday). There will be a new
circular released soon covering all the issues of concern raised this week;
some resolved, others may need continual engagement during the season,
depending on how events unfold. Main issues discussed were RTGS/USD loans
separations, with the RBZ to set minimum RTGS loan separation percentages. The
RBZ circular will confirm the percentage,” he said.
But insiders say the matter of loans was concluded and it
was resolved that contractors be repaid 70% in foreign currency and 30% in RTGS
dollars. Standard
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