Fin24.com | FairPlay: Zero rate chicken, not white bread

Fin24.com | FairPlay: Zero rate chicken, not white bread
Fin24.com | FairPlay: Zero rate chicken, not white bread

Chicken should become Value Added Tax (VAT) free, as it’s popular, nutritious and a staple food for lower-income households, says trade lobby group FairPlay.

"According to Stats SA, more than half the population – over 30 million people – live in poverty. These are the people who would benefit directly from VAT-free chicken," Fairplay’s founder Francois Baird said in a statement on Monday.

"Stats SA has also reported that about a third of all children in Gauteng and the Free State are stunted as a result of chronic malnutrition," Baird added.

FairPlay recommends that chicken be zero-rated, instead of the panel's finding of white bread and cake flour, arguing that poultry is a form of animal protein and more nutritious.

The advocacy group took exception to comments made by tax expert Judge Dennis Davis to Fin24 on Friday. Davis had said it would cost too much, around R10bn, to zero-rate chicken.

The VAT panel in August recommended that six further items become VAT free: white bread, bread flour and cake flour, sanitary products, school uniforms and nappies, in addition to the list of 19 currently zero-rated products.

The panel was appointed in May, to alleviate the burden of April's VAT hike on the poor.

Guard against collusion

The advocacy group also believes that the zero rating should be applied to chicken products most consumed by lower-income households, such as individually quick frozen portions.

The Woolard panel report expressed concern that rating chicken pieces as VAT free would be too high a burden on the fiscus, and the VAT relief might not be passed onto consumers, as it’s a highly concentrated market.

Spokesperson for FairPlay Melinda Shaw, dismissed the comment by the panel, calling it irrelevant, as there are instruments such as the Competition Commission to guard against price collusion.

She argued that the VAT panel had recommended white bread be zero-rated, but this industry has previously been found guilty of cartel conduct and driving up prices.

The chicken industry, in its submission to the Woolard panel, said cutting VAT is in the public interest, as lower prices will increase demand and could result in 11 000 new jobs and an additional R1bn in tax revenue.

Fairplay submitted an additional presentation before Friday’s deadline to comment on the VAT panel’s recommendations to Treasury. The lobby group has requested the opportunity to make an oral submission to Parliament, in a bid to push for chicken to become zero-rated.

Fin24 reported earlier that head of Tax and Financial Sector Policy at National Treasury Ismail Momoniat said the timing of the announcement of further VAT free items would depend on the parliamentary schedule.

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