Agriculture

VAT-free chicken will be a pro-poor proposal

The benefits for South Africa’s poorest people are going to be a focus of the submission by South Africa’s poultry industry for the removal of the 15% value added tax (VAT) from chicken products.

This was emphasised by Charles de Wet, tax executive at law firm ENS Africa, who is preparing the submission on behalf of the SA Poultry Association (SAPA) and the Association of Meat Importers and Exporters (AMIE).

In an interview with FairPlay, De Wet said the submission was nearing finalisation and should be submitted to the National Treasury in mid-November. The objective is to have “VAT-free chicken” included in tax changes next year.

While some details might still be changed, the application is likely to argue for the removal of VAT from all frozen bone-in chicken, and from all chicken offal, fresh or frozen. Offal includes chicken feet, heads and livers.

De Wet said these are the chicken products favoured by low-income households. Additional research was being done on the purchasing preferences of poorer people, and the likely effect on their product choice if removing VAT made chicken products cheaper.

The application will not include cooked chicken, or value-added products such as crumbed, marinated or spiced chicken pieces. Tinned chicken will not make the list, because it is cooked.

Frozen chicken products in the application will be “on the bone”, De Wet said. This would range from whole and half chicken to portions such as leg quarters, drumsticks and thighs.

De Wet said that the application for VAT-free chicken was in line with statements by President Cyril Ramaphosa on helping the country’s poor. When he opened the new parliament in July, Ramaphosa said the government wanted to expand the number of essential food items exempt from VAT. This week, he said the government of national unity would be judged by what it had done for poor people.

Chicken is South Africa’s main source of meat protein, especially in lower income households, making up 66% of all meat consumed in the country. It also contains vitamins, minerals and other essential nutrients. De Wet said the VAT-free submission would include a cost-per-gram comparison for chicken and other protein sources.

While the estimate of the revenue lost had yet to be finalised, De Wet said it would be less than R5 billion, and probably closer to R4 billion. Even R5 billion would be a tiny proportion of the tax take – about 1.1% of the R426 billion VAT collection in 2024, and 0.2% of the total tax take of R1.7 trillion.

In addition to the benefits for poor people, removing VAT from chicken would lead to the growth of the local poultry industry, which would result in increased tax revenues. 

De Wet said he did not expect a repeat of the procedure followed in 2018, when an expert panel was appointed to review the basket of VAT-exempt goods. His expectation was that the Treasury would review the application and make a recommendation to the Minister of Finance.