Nonprofit organisation the FairPlay Movement has noted that the proposal for the removal of value-added tax (VAT) from specified chicken products has been submitted to the government.

The proposal focuses on the need to improve the health of low-income consumers by making chicken more affordable.

The proposal was compiled by law firm ENS on behalf of the South African Poultry Association (SAPA) and the Association of Meat Importers and Exporters (AMIE).

It follows the statement by President Cyril Ramaphosa in July that the government intended to expand the basket of essential foods that were free of VAT.

Backed by research and statistics, the proposal shows why chicken should be zero-rated for VAT purposes.

“[The] detailed arguments [in the proposal] set out the nutritional, social and economic benefits of reducing the price of chicken in a country where millions go hungry and child malnutrition and stunting are widespread.”

The chicken products which the associations believe VAT should be removed from have been carefully selected as having the most benefit for South Africa’s poorer households.

The products are frozen bone-in chicken, from whole frozen chicken to portions such as leg quarters, drumsticks and wings, and fresh and frozen chicken offal, which includes chicken livers, heads and feet.

These are the products most consumed by low-income households, and making them VAT-exempt would bring targeted relief to the poor, the submission says.

Cooked chicken from shops and restaurants and value-added products such as crumbed, spiced or marinated chicken are excluded because they are bought mainly by higher-income shoppers.

Tinned cooked chicken is excluded, while uncooked tinned chicken livers would qualify for the proposed VAT exemption. This is because chicken livers are relied upon by poor households and are used in child feeding schemes.

SUMMARY

The submission provides various reasons why chicken should be VAT-free and the consequences the move would have.

It states that there is urgent pressure on government to provide financial relief to the poor.

“It is an economic and a social justice imperative that the regressive impact of VAT on poorer households is addressed. The zero-rating of chicken is a targeted instrument to give effect to the government’s obligation to review the basket of zero-rated food items and assist the poor in poverty alleviation.”

Additionally, it explains that chicken is higher in protein than any of the products currently on the zero-rating list.

“It appears a significant oversight that no animal proteins, other than pilchards, are included on the list of zero-rated foodstuffs,” it says.

Moreover, the submission posits that the zero-rating of the chicken products, as proposed, will disproportionately ease the burden on poor and low-income households reliant on chicken as a crucial and healthy source of animal protein.

It argues that if chicken is made more affordable for poor consumers by virtue of the zero-rating, more chicken is likely to be consumed. The increased consumption of chicken should increase the ability to reach daily protein targets, preventing stunting and malnutrition in especially children.

The submission notes that if ‘chicken’, as defined in the submission, were to be zero-rated, the estimated VAT revenue that the fiscus may forego is about R4.9-billion – about 0.27% of total revenue projected, or 1.08% of the total VAT collection projected for the current fiscal year.

“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.

“To ensure that the benefits of the proposed zero-rating accrue to the poor, there are existing measures for the monitoring and reporting of chicken prices.

“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 infrastructure is sufficiently developed to ensure ongoing accuracy and transparency of pricing information,” the submission states.