International Journal of Academic Research in Education and Review

Vol. 10(1), pp. 24-33, January 2022

ISSN: 2360-7866

https://doi.org/10.14662/ijarer2022015

 

Full Length Research

 

 

A study on Removing VAT and Other Taxes Levied on Feed and Feed Ingredients and its impact on the Performance of the Livestock Sector in Ethiopia

 

Demissie Negash 1, Getachew Animut 2, Daniel Temesgen3 and Berhan Feleke4

 

1Ethiopian Meat and Dairy Industry Development Institute, Bishoftu, Ethiopia  

2Agricultural Transformation Agencies, Addis Ababa, Ethiopia  

*Corresponding Author: demisenegash@gmail.com, Tel. +251912088441

 

Accepted 31 January 2022

Abstract

Abstract: Feed in terms of supply, quality and affordability is a critical bottleneck to transform the livestock sector. An important intervention to partly solve the challenges related to feed is the removal of value added tax (VAT) and other import taxes levied on feed ingredients and formulated feeds. This study was prepared with the objective of evaluating the impact of removal of VAT and import taxes on feed ingredients and formulated feeds. Price of feed ingredients has increased annually over the last five years. Due to the involvement of brokers and multiple taxation led to VAT imposed on feed ingredients to be up to 60% or more. Moreover, imported feed ingredients are generally taxed for duty, sur and withholding taxes accounting for 23%. These taxes resulted to increased feed prices with negative consequence on performance of the sector. Price of formulated feeds increased by 64, 56, 86, 87, 193, 66% over the last five years for layers, broilers, chicks, dairy, fattening cattle and shoats, respectively. Feed prices have been increasing annually by a range of 9 to 38% over the last five years The current farm gate prices for an egg, a liter of milk, a kg live weight of broiler and a kg live weight of cattle are 4.50, 22.00, 150.00 and 100.10 Birr, respectively. Feed cost accounted 58, 64, 34 and 67% of the farm gate price, and the share of VAT and other taxes to feed cost were 26, 29, 26 and 40% for an egg, a liter of milk, a kg live weight of broiler and a kg live weight of cattle, respectively. The current analysis indicated that the removal of VAT and other taxes from feed ingredients and formulated feeds will reduce feed cost by an average of 30.3%, price of livestock products will decrease by a range of 9-27% and amount of feed produced will increase by about 35% for poultry and by 82% for dairy and fattening cattle. Such intervention will also improve the affordability of livestock products, and one can purchase 18, 10, 23 and 37% more egg, broiler meat, milk and beef, respectively for the same price paid with VAT. The analysis result also indicated that this intervention will create an enabling environment to achieve national targets set for livestock production in the ten years perspective plan (2012-22 EC). Therefore, removal of VAT and import taxes from all feed ingredients and formulated feeds used by all livestock species to produce food either for domestic consumption or for export is highly and urgently recommended. This action will definitely help in transforming the livestock sector to accrue better socio-economic benefits for society as well as for the nation.

 

Keywords: Feed, VAT, Price.

Paper type: research