Making chicken VAT-free is a practical, cost-effective, and socially just policy to alleviate poverty, improve nutrition, and drive economic growth. The potential revenue loss is small compared to the profound benefits for South Africa’s most vulnerable citizens.
Poor people are hit hardest by value added tax (VAT), which is why removing VAT from chicken will benefit poor people the most.
This rationale for VAT-free chicken is contained in the joint submission to government by chicken producers and importers to exempt specific chicken products from South Africa’s 15% VAT. The pro-poor benefit is emphasised throughout the submission.
VAT should be removed from frozen chicken and from fresh and frozen chicken offal, because these are the chicken products most consumed by poor people, the submission says. It was compiled by legal firm ENS on behalf of the SA Poultry Association (SAPA) and the Association of Meat Importers and Exporters.
VAT is a regressive tax, in that poor people spend a larger portion of their income to acquire basic necessities.
“The poor, therefore, in comparison to their means, contribute a larger portion of their income to the VAT,” the submission states.
“It is an economic and a social justice imperative that the regressive impact of VAT on poorer households is addressed.”
While social grants were a potential alternative, there was a risk that grant funds could be misappropriated before disbursement. The government therefore had a responsibility to implement its undertaking to review the list of zero-rated foods in order to achieve “targeted relief for the poor and needy”.
“Chicken is the animal protein that is most consumed, and prioritised in terms of budget spend, in lower income households,” the submission stated.
“The zero-rating of chicken is therefore a targeted instrument to give effect to the government’s obligation to review the basket of zero-rated food items. The zero-rating of chicken … will disproportionately ease the burden on poor and low-income households that are reliant on nutritious chicken as a crucial and healthy source of animal protein.”
It was “untenable” that the poorest segments of society should continue to pay VAT on essential foods such as chicken protein, the submission said.
