VAT FREE Chicken

Don’t ‘discriminate’ against chicken, committee hears on VAT hike

Submissions on the Value-Added Tax (VAT) Panel’s report to Parliament on Wednesday ranged from pleas to exempt chicken as a protein staple to imposing a special value added tax of up to 20 percent on luxury goods.

The latter came from the Congress of South African Trade Unions (Cosatu), who said it was disappointed that no concessions have been made to the poor on essentials, including water and electricity.

Cosatu’s parliamentary representative Matthew Parks told the standing committee on finance there should be a “progressive sliding VAT regime for water and electricity for poor and working class households” and that it viewed the panel’s failure to propose as much as a glaring omission.

Parks also pleaded for a time limit, for example one year, to be imposed on the one percent hike in VAT, the country’s first in 25 years, that was implemented in April and said overall Cosatu believed the panel should have called for the VAT hike to be rescinded. The increase to 15 percent was meant to bring the state an extra R22.9-billion in revenue.

But Parks said it was a regressive tax that made the poor pay for the loss of state revenue through corruption.

“The real solution to the budgetary crisis is simply to stop the looting and wastage and recover our stolen taxpayers’ monies.”

Lobby group FairPlay’s Lionel Adendorf urged Parliament to propose the inclusion of chicken on the list of items that will be added to the zero-rated basket. The VAT panel estimated that zero-rating poultry would result in a tax break of about R6-billion to the consumer and could not reach consensus on the issue, instead deferring it to MPs.

Adendorf argued that it was the preferred form of protein of the poor and an exemption would help prevent malnutrition, quipping: “Don’t discriminate against chicken.”

The South African Poultry Association concedes that there would be a cost to the state but said it would boost an industry that already employs 130 000 people.

The South African Poultry Association said in a submission to the committee that it was committed to ensuring that any VAT savings as a result of the zero-rating of primary chicken products “are achieved in the supply and are passed on to our consumers”. It estimates that zero-rating, and the resultant price drop, would lead to an increase in demand of 7.8 percent, which would in turn create some 11 000 jobs.

The committee also heard a plea to zero rate basic medicines, saying if the poor could not afford medicine they would simply skip clinic visits, leading to more people with health complications, which would in turn place a greater burden on the public health sector.

The VAT panel recommended that the zero-rating be extended to white bread, flour, nappies, sanitary towels and school uniforms.

The public comment period on the panel’s recommendations closed at the end of August.

Finance Minister Nhlanhla Nene will now have to take into account these submissions, as well as those of the treasury team and the revenue service, before deciding which of the panel’s recommendations to implement.