Call suggests to scrap VAT on poultry prices to benefit poor

TRADE movement Fairplay wants the value added tax (VAT) on some chicken cuts meant for the lower income market to be scrapped to ease the impact of rocketing food prices.

According to estimates made in a 2018 report, this could lop off about R1.2 billion in tax revenue.

At a roundtable discussion on amongst other things, the impact of the ongoing Russia/Ukraine conflict to food prices, Fairplay said removing VAT from some of the portions popular with the mass market was one of the levers at the disposal of the state to cushion South Africans from the rising food and fuel prices resulting from the conflict. “Chicken (meat) is a national source of nutrition. The poultry industry is a strategic one.

“Mothers need protein when they are carrying babies, and children below the age of five need all that protein or they suffer stunting,” Fairplay Founder Francois Bard said.

The discussion that centred largely around illegal dumping of poultry products from well developed countries, and its impact on the local industry and economy, also called for the scrapping of VAT on individual quick frozen chicken parts. A PricewaterhouseCoopers (PwC) study indicated that the estimated cost to the fiscus if individual quick frozen (IQF) chicken was to be zero-rated would be R2.1bn. The definition of chicken portions to be zero-rated focuses on those favoured by low-income households, and excludes those that appeal to more affluent consumers.

PwC said based on the local sales figures and import data, it estimated that the proposed product, “primary chicken”, represented about 33 to 40 percent of total chicken consumption. “The estimated VAT loss regarding IQF chicken is approximately R2.7bn, based on the producer information we received and analysed. “We estimate that IQF chicken represents 58 percent of all chicken sales. This will result in an estimated foregone revenue of R1.5bn to R1.9bn as a baseline regarding ‘Primary Chicken’,” the PwC report said.

Fairplay noted that chicken meat is the least expensive and most popular meat protein and is the food product most consumed by lower income households. That means that zero-rating chicken would directly target the poor, who are most affected by food price rises.

The national food safety agency to monitor the standards of poultry available in the country was also discussed, particularly imported products whose handling from external sources did not guarantee safety.