Hippo Valley Estates
CHIREDZI- Tongaat Hulett Zimbabwe has taken sugarcane farmer associations to task for allegedly working in cahoots with the Zimbabwe Revenue Authority (Zimra) to dodge Value Added Tax (VAT) which was remitted from their 23 percent Division of Proceeds (DoP)
The company got into milling agreements with many small-scale ‘A2’ farmers represented by such organisation as Zimbabwe Sugarcane Development Association, Mkwasine Sugarcane Farmers Trust, Zimbabwe Cane Farmers Association, Commercial Sugarcane Farmers Association of Zimbabwe, Hippo Valley Productive Sugarcane Farmers Association, Zimbabwe Sugarcane Development Association Royal Trust, Chipiwa Mill Group, Chiredzi Productive Cane Growers Association.
A total of 23 percent of the value of the sugarcane taken to the mill is taken by Tongaat Hulett to cover milling costs while the remaining 75 percent is remitted to the farmer in an arrangement known as DoP.
According to the summons served to the sugarcane associations by the two Tongaat Hulett holding of Triangle Limited and Hippo Valley Estates through their lawyers Scanlen and Holderness, the arrangement is that valued added tax (VAT) is also levied and added on top of the milling costs and the total is then invoiced to the farmer.
In the summons, Tongaat Hulett is challenging Zimra, accusing the tax collector of double standards by backtracking from its authorization that the company should collet VAT on its behalf.
"The first respondent (Zimra) acknowledged as correct the position that the applicants may meanwhile charge and collect VAT on the alleged milling service charge from the farmers. However, in a meeting the applicants had with the commissioner and other officers of the first respondent, they were surprised to be instructed by the first respondent that they were not entitled to charge, levy and collect VAT on the alleged milling service be it for past, present or future supplies. The reason given for it was allegedly that VAT is already included in the supposed price of charge for the milling service.
"Factually, that would not be correct as the milling charge under the DoP is exclusive of VAT. Put differently when the formula for determining the attributable value in the provision of a milling service in processing or beneficiation of sugarcane to sugar is considered, the resultant 23% value which is payable by the farmer (under cane milling agreement) and that is determined by applying the DoP on the proceeds is the actual cost associated with the milling of sugarcane before any value added tax (VAT) which the first respondent may consider applicable to it," the summons read.
The sugar producer is seeking to recover about six million dollars which it was directed to pay as VAT but which it now believes was supposed to be paid by farmers.
"The applicants sought to recover from the farmers the VAT which they (applicants) were directed by the first respondent to pay. The applicants believed that it was only reasonably proper in the circumstances that assuming without conceding that it is correct as decided by the first respondent that they were considered as providing to the farmers a service which attracts VAT, then they will be entitled and required by the same token to charge, levy and collect it from the recipient of the service who is the farmer as would be the case anyhow with a regular cane milling agreement," the summons further read.
Chiredzi West Member of Parliament (MP) Farai Musikavanhu and his Chiredzi North colleague Roy Bhila are listed as 10th and 11th respondents respectively over their alleged role in advocating for Zimra to get VAT remittances of farmers directly from Tongaat Hulett.