Abstract:
The Value Added Tax (VAT) Act, 2013 changed the categorization of animal feeds from the zero-rated category to the taxable category. In this brief, we use the case study of poultry farmers to demonstrate the implications of implementing the VAT Act, 2013 on livestock production. Imposing a 16 per cent VAT on animal feeds has not only increased the price of animal feeds by a similar margin, but has also led to a decline of profits by between 70 and 100 per cent in the case of poultry farmers. The increase in input prices coupled
with lower output prices has forced some small scale farmers to withdraw from the enterprise in the face of declining profits. As a result of non-competitiveness of farmers in the subsector, the country risks adverse long run effects on poverty, nutrition and unemployment as well as infiltration of cheap imports in the long run. To
reverse this adverse effect, we recommend zero-rating VAT on animal feeds.
