Zambian tobacco producers want VAT exemption to stay competitive

Faced with a decline of more than 50% in production since last year, Zambian tobacco producers want Value Added Tax (VAT) exemption to gain market competitiveness.

In submissions to the 2018 national budget, the Tobacco Association of Zambia (TAZ) said scrapping VAT will level the playing field for local producers when competing with their counterparts in Southern Africa.

“The taxation of tobacco makes it challenging for local producers to flourish,” said Phonto Mumbi, TAZ consultant.

Mumbi said the Zambian tobacco market is the smallest market. Its major customers are multinationals who view southern Africa as a single market.
“For local producers to be competitive, the crop must be taxed similarly to those of other countries in the region,” he said.

Zambia’s tobacco production dropped from last year’s 45 000 tons to 22 000 tons, a development the industry attributed to increased pressure from anti-tobacco lobbyists. The sector employed 450 000 people directly and indirectly and is an important contributor to the Gross Domestic Product (GDP).

TAZ said the decline in production resulted in a loss of more than US$100 million in foreign exchange earnings. The average price per kilogramme is US$3.10.

Government committed to ensuring the viability of the tobacco industry to promote job creation and improve the lives of rural communities. This entailed developing policies to encourage investment in tobacco production.

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