by Paul Gooday
Fear mounts as government plans to tax basic agro-inputs
The government intends to tax basic agricultural inputs, raising concerns about its commitment to transform the key economic sector. Over 300 essential modern agricultural technologies and supplies critical for farming mechanisation will be removed from the list of the zero-rated value added tax items, through the VAT Tax Bill of 2013. The VAT Bill, to be brought to the National Assembly in 2014, will only exempt 17 items.
Fertiliser is among the items to be removed from the zero-rated list. This means that fertiliser, which is already considered expensive by most smallholder farmers, will soar to TSh94,400 up from TSh80,000 per 50kg bag. Due to its high costs, the level of fertiliser use in Tanzania is as low as 7kgs nutrients per hectare, compared to 27 kg nutrients per hectare for Malawi and 53kg for South Africa, and well below the recommended minimum of 50kg of nutrients per annum.
Other items to be removed from VAT exemption include irrigation and water harvesting technologies; pest management products and plant protection substances, especially chemicals and biological control agents; special planting materials like plastic bags and seed trays; storage, post-harvest and cooling facilities and equipment such as refrigerators; materials for construction and expansion of farm infrastructure including greenhouses; and packaging materials of all kinds.
Should the Bill be passed a standard 18% VAT will be applicable on agricultural inputs, and will result in higher costs of production, reduced investment, lower production and potentially food insecurity. Farmers say that the move will discourage agricultural mechanisation and make the country less attractive to investors. Local produce will become uncompetitive in the world market and will drive an inflation upsurge.
Unilever 110 Million Euro Agricultural Investment in Tea Production
Unilever has chosen the Southern Agricultural Corridor of Tanzania (SACGOT) to expand its tea production. The planned investment will triple Unilever’s production of tea from smallholders and is expected to generate significant export revenue, projected at €110 million. As a partner of Tanzania’s SAGCOT initiative, Unilever will ensure that its investment also addresses social economic and environmental goals. The investment will promote development in the Iringa and Njombe regions by creating 10,000 jobs, enhance the livelihoods of another 2,000-3,000 tea small holders, and in total, touch the lives of an estimated 50,000 people. Unilever has signed an agreement with the Ministry of Agriculture, the Tanzania Tea Board and the Tanzania Smallholder Tea Development Agency, to progress the development of the project in line with the government’s social and economic aspirations. (Tanzania Invest)