Govt, farmers meet to renegotiate regulations

Zambian farmers are negotiating with the government on it decision to continue taxing key agricultural inputs, officials told IRIN. Under new regulations announced in the 2005 budget, the authorities slapped Value Added Tax (VAT) of 17.5 percent on agricultural and animal products like milk, fish and export vegetables. It also disallowed farmers earning less than US $45,000 a year from reclaiming VAT refunds. "The doors are not closed yet, we are still negotiating with the government," president of the Zambia National Farmers' Union (ZNFU), Guy Robinson, said on Monday. Minister of agriculture, Mundia Sikatana, told IRIN that the government was holding meetings with farmers and manufacturers affected by the new regulations. "[Finance Minister Ngandu] Magande has broken his government's assurances. When the tax [VAT] was introduced in 2004, the government assured farmers that this was a one-year nightmare," said a recent editorial in The Post newspaper. In its 2004 budget, the government reversed an eight-year policy, slapping VAT on most farming inputs and disallowing farmers from claiming tax refunds. Since then, all farmers have had to pay VAT on power, equipment, transport, fuel and all other investments on their farms. The union foresees a big change in the farming system, away from 'VAT-exempt' to taxable agricultural commodities, posing a threat to food security and its members' livelihoods. The "government has blatantly discriminated against small- and medium-scale farmers", by introducing a selective system for reclaiming VAT, it said. Small-scale farming implements attracted VAT when purchased from suppliers who were VAT registered, but the small-scale farmer was then unable to reclaim the tax, the union pointed out. "This increases the cost of production. Small-scale implements, such as hoes, axes, ox-ploughs, ox-carts and similar items, including small-scale equipment used in the poultry industry, should be [made tax free] for the farming community," ZNFU said in a statement. After a failed harvest in 2002 left an estimated 2.3 million people in need of food aid, Zambian agriculture has bounced back and is exporting some of its surplus maize. But, farmers say, frustratingly VAT seems to have been imposed arbitrarily. The government this year removed taxes imposed on some inputs and produce like wheat, cotton seed, seed cotton, cotton lint and selected export vegetables. "The tomato on your plate and milk in your glass are taxed differently from the carrots and green beans you may want to enjoy with your meal, but can't afford. Farmers will not judge what they can grow the best, but what the ZRA [Zambia Revenue Authority] allows them to grow profitably," commented the Post. The budget also did not reflect the need for infrastructure development such as irrigation, road networks, telecommunications and electricity supply, which were "major factors affecting the competitiveness of Zambia's agriculture and ability to withstand effects of drought," said ZNFU. However, the 2005 budget did have some positive attributes. The union welcomed the upward revision of customs duty from 5 to 15 percent on selected agricultural commodities, such as wheat, maize and soybeans, as this would allow local products to compete more equitably with imported ones. "Production costs for local products are very high, and until such time that production costs are reduced, the playing field needs to be levelled. The measure to increase customs duty leaves the challenge on farmers to produce more," the union said. ZNFU also welcomed the continuation of the Fertiliser Support Programme, which helped to counteract the disadvantages of rural infrastructure and boost maize production by small-scale farmers. The budget set aside $31.4 million to assist 150,000 to 180,000 farmers, raising the number of beneficiaries. The union called for effective monitoring of the programme to ensure that the assistance reached the intended beneficiaries.