The South African Poultry Association (SAPA) announced on Thursday that it would submit an application that certain chicken products be zero-rated in terms of value added tax (VAT) – that is, that they will be exempt from VAT. The application will be submitted in the middle of next month. This step followed President Cyril Ramaphosa saying that the government will increase the number of essential food items that will be exempted from VAT.

“The benefit of VAT-free chicken is enormous, we expect a meaningful increase in consumption, giving malnourished people access to nutritious chicken products they previously could not afford,” affirmed SAPA broiler organisation head Izaak Breitenbach. “We’ve been producing affordable chicken for the masses for many years, and we continue working hard to create the conditions necessary to keep delivering on that promise.”

The aim is to zero-rate those chicken products which are most often bought by low-income households. SAPA is working with retailers to identify these particular products. Currently, the planned submission list includes fresh and frozen chicken offal and frozen bone-in chicken. Value-added products, such as crumbed or spiced chicken and marinated chicken cuts will be excluded.

SAPA expects that such a step will increase demand, leading to increased production. This will also improve the country’s food security.

Zero-rating such chicken products will reduce the State’s tax revenues by a little more than R4-billion. This is less than 1.1% of total VAT revenues (which came to R426-billion last year). On the other hand, increased local production will increase State revenues from other forms of taxation. And anti-dumping tariffs have also generated some revenues, since they were imposed in 2018.

SAPA made similar proposals in 2018, which largely foundered on the question of individually quick-frozen (IQF) chicken pieces. In particular, the Government had been concerned about possible abuses of the definition of IQF pieces. SAPA is now seeking to avoid this by aligning its submission with the regulations.

“VAT-free chicken can act as a material kick-starter for low-income households, [and] feed South Africa’s malnourished and impoverished citizens,” he added.