Treasury gets it wrong on VAT-free chicken

While calls mount for the removal of the 15% value added tax (VAT) from chicken, the Treasury says it has no plans to do so.

That’s not a “no”, but it’s also not a maybe”, and it’s not good news for South Africa’s poorest households, for whom chicken is their primary source of meat protein.

The Treasury response came in comment to the Sunday Times, which published a prominent report the previous week featuring arguments in favour of VAT-free chicken.

Securing the removal of VAT from chicken portions has been a FairPlay goal since 2018, and FairPlay founder Francois Baird said he found the Treasury response “disappointing”.

“The Treasury has relied solely on the 2018 report of the Woolard panel which failed to reach consensus on removing VAT from chicken and therefore did not support it. It has made no effort to contact chicken producers, consumer organisations or other stakeholders for an update, as present conditions are very different to what they were then.

“Food security is now at stake. The impact of the Covid pandemic, incessant power cuts, and the war in Ukraine have pushed up input costs, so producers are struggling. They are going to have to raise prices, which will be another inflationary blow for consumers. Removing VAT from the chicken portions mainly consumed by poor people would help them, and it would help the poultry industry.”

Baird also questioned the Treasury comment that chicken suppliers might not pass on the VAT saving to consumers.

“In 2018, the poultry industry undertook that its members would pass on the benefit, and they surely would do so again. Retailers would be under huge pressure to do likewise, as their prices are public and compared by vigilant consumers and watchdog organisations.

“In any case, why single out poultry producers? The Treasury has no problem believing suppliers of other VAT-free food products, such as eggs, bread, canned pilchards and vegetable oil, will pass on the savings. Why should it not believe chicken producers?

“FairPlay will continue its campaign for VAT-free chicken, and we will be contacting Treasury in this regard. We would urge Treasury not to take a final decision on the issue until it has heard all viewpoints, including chicken producers and consumers,” Baird said.