The Civil Society Agriculture Network (Cisanet) has expressed worry over the 16.5 Value Added Tax (Vat) that was imposed on milk, saying this has had a negative impact on farmers.
Cisanet Executive Director Tamani Nkhono- Mvula said some private dairy companies are reducing the amount of money which they spend to buy milk from farmers.
Recently government through the Malawi Revenue Authority (MRA) introduced a 16.5 Vat on milk, which was previously zero rated.
In a letter to its milk suppliers, Lilongwe Dairy (2001) Limited has reduced the price of buying raw milk price from K170 per litre to K155 for the months of February to May 2017.
“The main reason for the reduction in milk price has been the increase in milk price to the consumer of an average K90 per litter due to the introduction of Vat on milk sales.
“This has made milk unaffordable for many people and resulted in dropping milk sales and increasing milk stocks in warehouses,” reads the letter in part.
Nkhono-Mvula has since said the imposed Vat on raw milk has a negative knock-on-effect on farmer’s livelihood.
He said Cisanet has been talking to government for quite some time to reconsider revising the decision.
“The decision to reduce milk price by these companies is because they are making loses and these loses are now being transferred to the farmers.
“Farmers will incur huge loses and some of them may consider pulling out of dairy farming because they are not getting much support from government as the regime keeps on punishing them with taxes,” he said.
Nkhono-Mvula said Malawi already has the lowest per capita consumption of milk in the world, adding that such taxes only worsen the situation.
He has since said as the midterm budget review is underway, Parliament must consider removing this tax as it is only helping in making people poor and reducing further the consumption of milk in this country.
“As matter of fact we would like to government to impose a 5 percent tariff on all imported dairy products and the resources realised from these tariffs must be reinvested in dairy farming development in Malawi,” said Nkhono-Mvula.