The imposition of four percent withholding tax on the sale of cattle means more hardships for the local farmers, says the Botswana National Beef Producers Union (BNBPU).
With the new Income Tax (Amendment) Act of 2015, government has exempted the Botswana Meat Commission (BMC) from the 15% taxation and replaced it with four percent tax on money paid to farmers for the supply of cattle deducted as withholding tax.
BNBPU chairperson, Madongo Direng said although it is a good move for the government to do away with taxation of the BMC on gross income derived from sale of meat and meat products, it is “totally unacceptable” to replace it with taxation of the cattle farmers on gross income derived from the sale of cattle for slaughter or feeding.
He said the new arrangement would impoverish cattle farmers in the country, who are already struggling to survive the harsh conditions in which they operate.
“It means that the price of livestock will with effect from July 1, 2016 be reduced by four percent. For the feed lots, more cash flow problems for them because they will have to wait for more than a year in order to claim a set off or a refund,” said Direng. He asserted that the beef industry, which is already struggling, will collapse if the implementation of the amendment is not suspended until the farmers are consulted.
“The notion that anyone can be taxed on gross income is unfair, especially within the context of the cattle farming where almost invariably, the cost of production far exceeds the gross income,” said Direng. The position of the income tax at present is that only people earning an income exceeding P36,000 per annum are obliged to pay tax. The chairperson said it is not clear why the situation should be different for the farmers.
Furthermore, he noted that in business taxation, tax is only payable on profit and not on gross income because all the operating expenses must be taken into account.
“Why should it be different when it comes to the business of cattle rearing?” he asked.
He also added that the fact that the farmers will no longer be allowed to set off their farming losses against any other income and to carry their losses while highly profitable ventures such as mining are allowed to do so, is unfair to the cattle farmers of this country.
According to Direng, the BNBPU, which is the official representative of the cattle farmers in Botswana, was not consulted before the law was presented to Parliament.
He said the union has written to the permanent secretary in the Ministry of Agriculture for a meeting to discuss the matter, but are still waiting for a reply.