Picture: 123RF/MONTICELLO
Picture: 123RF/MONTICELLO

Strong support was expressed by lobby groups and nongovernmental organisations (NGOs) in Parliament Wednesday for chicken to be included in the list of zero-rated items.

Parliament’s finance committee heard submissions from stakeholders on the recommendations of a panel of experts, which had considered what additional items could be zero-rated in order to mitigate the effects of the one percentage point increase in the VAT rate to 15%, on the poor.

The panel of experts, appointed by finance minister Nhlanhla Nene, was led by Stellenbosch University professor Ingrid Woolard. It recommended that white bread, bread flour, cake flour, sanitary products, school uniforms and nappies be zero-rated from VAT, in addition to the 19 items already zero-rated. The panel estimated that its recommended items would represent a loss to the fiscus of about R4bn in VAT revenue foregone.

The panel did consider zero-rating chicken but was divided on the issue and so chicken was not included in its list of recommended items.

Union federation Cosatu’s parliamentary co-ordinator, Matthew Parks, told MPs that it was disappointed that locally produced poultry was not recommended for zero rating. He said poultry was a key nutrient for working-class families and making locally produced poultry VAT free would be an important boost for a fragile sector battered by imports.

Pietermaritzburg Economic Justice and Dignity Group’s co founder Mervyn Abrahams while opposing VAT on all foods was concerned that "apart from starches no additional nutritionally rich foods have been included". Protein in the form of peanut butter, chicken and other meats should be considered, he said..

South African Poultry Association acting GM Ziyanda Majokweni noted that chicken was the item on which lower-income households spent the highest percentage (13%) of their total food expenditure followed by mealie meal and maize flour at 10%.

"Chicken is the highest protein meat source per rand spent," she said. Poultry producers were committed to ensuring that any VAT savings as a result of the zero-rating of primary chicken were passed on to customers.

The Budget Justice Coalition also supported the inclusion of chicken in the zero-rated list, among many other items. Its representative, Paula Proudlock, said poultry was a major source of animal protein for the poor and low-income households.

"SA’s high and increasing stunting rates for children under five years (27% of all children under five years) and high rates of iron deficiency for pregnant women (26%) indicate a need for increased access to foods high in protein."

The coalition and the Institute for Economic Justice called for a 25% VAT rate for luxury goods, which could generate about R9.6bn.

Fairplay also argued strongly in favour of zero-rating chicken.

The panel of experts estimated that VAT relief for all poultry would represent VAT revenue foregone for the fiscus of about R6bn at 2018 prices.

The arguments by panel members opposed to zero-rating individually quick-frozen chicken were that the definition was not sufficiently rigourous to avoid the inclusion of other poultry products, and this would therefore inflate the cost of zero-rating for the fiscus; the relatively high cost to the fiscus; that it would encourage higher poultry imports; and that the health benefits of zero-rating chicken could be achieved through nutritional programmes.

Those on the panel in favour of zero-rating individually quick-frozen chicken argued that it was a staple food for low-income households and that imports helped hold down the price; zero-rating would have a progressive impact; and that the definitional problems were not persuasive.

ensorl@businesslive.co.za

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