Making essential foods cheaper for poor consumers was more than worth the loss of revenue from value added tax, poultry producers and importers told parliament last week.
Removing VAT from chicken products consumed by poor households was “an economic and a social justice imperative,” Izaak Breitenbach of the SA Poultry Association (SAPA) told the standing committee on finance. He was presenting on behalf of SAPA and the Association of Meat Importers and Exporters (AMIE).
Producers and importers have jointly argued for the removal of the 15% VAT from frozen chicken and from fresh and frozen offal products.
VAT relief would have a major positive impact on nutrition and poverty relief for the poor, Breitenbach said. He drew attention to the following:
- South Africa has one of the highest stunting rates in the world, currently estimated at 28.8% of all children under five years old and 36% for poorer households. Stunting, caused by chronic malnutrition, resulted in “irreversible physical and cognitive deficits”.
- The government had to address the impact of VAT on poorer households. Zero-rating chicken was a targeted way to do this. Chicken had a lower cost per gram of protein than pork mince, eggs or beef mince.
- Chicken was higher in protein than any of the products currently on the zero-rated list. No animal proteins, except for pilchards, were zero-rated for VAT. Frozen bone-in chicken and fresh and frozen offal would therefore have a major impact on malnutrition for the poor.
- Zero-rating these chicken products would disproportionately ease the burden on poor and low-income households who relied on chicken as a crucial and healthy source of animal protein. It would help adults reach daily protein targets and would prevent malnutrition and stunting in children.
- Removing VAT from these chicken products could potentially result in a loss of R4.9 billion in annual revenue. This would be only 0.27% of total projected revenue this year, or 1.08% of the projected VAT collection.
“The perceived or any actual loss of revenue to the fiscus cannot be unjustifiably privileged above securing affordable nutritious food for the benefit of lower income households,” Breitenbach said.
Countering suggestions that the benefits of VAT exemption might not be passed on to consumers, he noted the many chicken price monitoring measures implemented by government and the private sector.
“Not only will this ensure that there is an accurate starting point from which to evaluate prices following the implementation of the zero rate, but the existing infrastructure is sufficiently developed to ensure ongoing accuracy and transparency of pricing information,” Breitenbach concluded.
