Will chicken be VAT-free soon?

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The government is considering expanding the list of VAT-exempt food items, potentially adding chicken products for the first time to bring some relief to South Africans amidst the ongoing rising cost of living.

What items are currently on the VAT-exempt list?

Certain chicken products may very well be added to the list of food items that are exempt from value-added tax (VAT). The South African Poultry Association (SAPA) is in full support of the proposal.

South Africa’s VAT-exempt list currently includes 19 basic food items:

Brown bread
Maize meal
Samp
Mealie rice
Dried mealies
Dried beans
Lentils
Tinned pilchards/sardinella
Milk powder
Dairy powder blend
Rice
Vegetables
Fruit
Vegetable oil
Milk
Cultured milk
Brown wheaten meal
Eggs
Edible legumes and pulses of leguminous plants

According to Daily Investor, the list was last expanded in 2018, following an extensive analysis of the impact of any expansion by the National Treasury.

In several addresses to Parliament and the National Council of Provinces (NCOP), President Cyril Ramaphosa has outlined the government’s plan to provide financial relief to South African households.

‘Food is among the most basic of human needs. Yet, nearly a quarter of households consider their access to food as inadequate or severely inadequate,’ Ramaphosa told the NCOP.

“Among the measures to ensure that all South Africans have affordable access to sufficient food, the government is looking at whether the basket of food items exempted from VAT could be expanded to include more basic products.”
President Cyril Ramaphosa

SAPA pushing for chicken to become VAT-free

The current VAT-exempt list does not include any meat-based proteins.

SAPA submitted an application to the government late last year for chicken products to be VAT-free, arguing that it would improve citizens’ access to meat. Additionally, it would boost the poultry industry, which generates around R65 billion in annual revenue and employs 146 000 South Africans. Increased local production and exports would generate additional tax revenue.

The goal vs. the outcome: Will the rich benefit more in the end?

Ultimately, the goal of adding more items such as chicken to the list of VAT-exempt list is to help poorer households financially and in terms of proper nutrition. However, this may mean that the rich benefit more in the end. Removing taxes on a product lowers the price for everyone, regardless of income level. Because rich people often buy more of these items, so they end up saving more money, even though they do not need the help as much.

But, does it matter that the rich benefit seeing that the poor will also benefit? According to experts, it does matter. Here is why:

Limited resources: Governments have finite budgets. If a policy intended for the poor primarily benefits the wealthy, it diverts funds from more targeted programmes like investments in healthcare and education for disadvantaged communities.
Increasing inequality: It can further widen the gap between rich and poor. This can lead to social unrest, economic instability, and a less equitable society overall.

A study by the Organisation for Economic Cooperation and Development found that zero-rating is not the best tool for supporting poor households.