Tobacco Auctioneers Call For Exemption Of 2 % Transaction Tax

Service providers to the tobacco industry have requested for an exemption from the two percent tax on electronic transfers introduced by Government last year.

This comes amid fears that they might pass on the 2 percent tax burden to the growers.

Other service providers like Boka Auction Floors had already put a one percent service charge on growers to mitigate electronic transfer costs  last year before the 2 percent tax was introduced in October.

“We are facing a challenge at the moment though we’ve approached the Ministry of Finance through our regulator with regards to the 2 percent intermediary money transfer tax. We handle money transferred to us by the merchants as we facilitate onward payment to the growers, so it will consume quite a big chunk,” Boka Group managing director, Chido Nyakudya told 263ChatBusiness.

Earlier this week, Nyakudya told the Parliamentary Portfolio on Land and Agriculture, Water, Climate and Rural Settlement that last year before the tax was introduced the company handled US$ 70 million from merchants that was to be split paying different farmers hence the 2 percent is likely to erode their revenue.

“I will talk about 2018. In 2018 we handled US$ 70 million on behalf of merchants for onward payment of growers and our revenue is less than 7 percent of this, but if you calculate 2 percent of the US$ 70 million, it really take a big chunk of our revenue. So we have requested that the 2 percent be exempted for transactions between ourselves and tobacco growers and we have presented this to the Ministry of Finance through our regulator and we waiting for response,” she said.

However, in the latest progress report on the implementation of reforms under the Transitional Stability Program (TSP) Finance and Economic Development Minister, Mthuli Ncube expressed satisfaction with the 2 percent tax regime projecting a $ 600 million scoop by end of year.

Meanwhile Tobacco Industry Marketing Board (TIMB) has licensed three auction floors for this year’s tobacco marketing season which are Boka Tobacco Floors, Tobacco Sales Floor and Premier Tobacco Auction Floors.

It has also licensed over 40 buyers to purchase tobacco from 171 506 growers registered with the regulator.