1. Dawie Maree Senior Economist 26 August 2014
Draft Taxation Laws Amendment Bill: Submission to the Standing Committee on Finance
Dawie Maree
Senior Economist
26 August 2014

2. About Agri SA
Agri South Africa is a federal organisation which promotes, on behalf of its members, the sustainability, profitability and stability of agricultural through its involvement and input on national and international level
Represent farmers through:
9 provincial unions
24 commodity organisations
Involvement and input on national and international level
Representing also TAU SA, Potatoes SA

3. Contribution to SA’s GDP(%)
Sector
1946
1976
1996
2005
2013
Agriculture, forestry and fishing
Mining and quarrying
10.5
6.1
10.1
3.6
5.9
2.7
6.4
2.4
9.2
Manufacturing
Electricity, gas and water
Construction (Contractors)
15.1
1.7
1.9
20.7
2.3
4.3
17.2
2.8
16.2
2.0
2.1
11.6
3.0
3.7
Wholesale and retail trade, catering and accommodation
Transport, storage and communication
Finance, insurance, real-estate and business services
Community, social and personal services
General government services
15.5
8.7
8.9
17.3
9.9
11.7
8.3
11.4
12.0
7.8
14.2
19.2
14.5
12.1
8.4
18.6
13.3
16.6
21.5
23.1
17.1
Source: SA Reserve Bank, Mar 2014

4. Agriculture’s linkages with the rest of the economy
Backward linkages
Purchases of goods such as fertilizers, chemicals and implements
Forward linkages
Supply of raw materials to industry and the food supply chain in general
Approximately 70 percent of agricultural output is used as intermediary products in other sectors

5. Agriculture’s linkages with the rest of the economy
GDP multiplier for agriculture is (Mullins, 2004)
Increase of one rand in agric production will result in an R increase in the GDP of the country.
On par with the GDP multiplier for the total average economy of 1.58.
Labour multiplier of outweighs all other sectors (Mullins, 2004)
Well above the same multiplier for the economy as a whole of

6. SARS/Treasury proposal - Impact
SARS/National Treasury proposed to repeal the zero rating of agricultural inputs
Section 11(1)(g), Schedule 1 Paragraph 7(a) and Part A of Schedule 2 of the VAT Act (1991)
Consultations
Reasons
Fraud resulting in misuse of the VAT103 certificates

7. Realities of the sector
Seasonality of production
Cash flow considerations
Financing of VAT for a period of time
Compliance and associated costs

8. Expenditure on intermediate goods and services (2013)

9. Expenditure on intermediary goods and services, interest, labour and investment in vehicles, machinery and implements
2012
R’million
2013
% Change
Farming services
Building and fencing materials
Fuel
Dips and sprays
Electricity
Insurance
Maintenance and repairs
Fertiliser
Packing material
Seed and plant material
Farm feed
Total: Intermediary goods and services
Labour costs
Interest
Gross Investment: Vehicles, machinery, implements
6.8
9.1
7.3
9.0
11.0
12.0
11.7
6.1
9.8
8.2
8.9
5.9
8.8
Die besteding aan intermediêre goedere en dienste het met ongeveer 10% gestyg tot R miljoen gedurende 2006/07. Die besteding aan boerderydienste (10,8%), brandstof (10,4%), mistowwe (28,9%) en veevoer (11,5%) behels die items wat die grootste stygings in 2006/07 getoon het. Die besteding aan rentekoste het toegeneem vanaf R3 898 miljoen in 2005/06 tot R3 937 miljoen gedurende 2006/07 - 'n geringe styging van 1%.
Source: DAFF

10. International situation of agriculture
Peculiar nature of agriculture recognised in various other countries
Support for agriculture in various forms
EU CAP
Producer Support Estimates (PSE’s)

11. The Producer Support Estimate (PSE) is an indicator of the annual monetary value of gross transfers from consumers and taxpayers to support agricultural producers, measured at farm gate level, arising from policy measures, regardless of their nature, objectives or impacts on farm production or income.

12. Producer Support Estimates as % of gross farm receipts, 2010-12 average
OECD Members
Emerging Economies
Producer Support Estimates, 2013

13. Role of agriculture in South Africa
National Development Plan
Job creation
Rural economic development
State of the Nation Address
Risks
Natural/climate
International and local economic situation
Policy uncertainty

14. Food security / affordability
Unintended consequences
Needs more scrutiny
Availability of finance to farmers
Production decisions
Supply results

15. Problem statement
Not convinced that zero ratio is root cause of the problem
Cost-benefit analysis of the proposal to repeal the zero rating of agricultural inputs

16. Recommendations / Alternatives
Propose some alternatives
Verification and audit of VAT103 certificates in conjunction with organised agriculture;
Additional field on VAT201 forms for zero rated inputs;
In the case of fraudulent activities, SARS can make full use of the law and organised agriculture will support it
Representative vendors to undertake VAT-duties

17. Conclusion
Neutrality of tax system
Can’t compare a biologically driven sector with other sectors of the economy
System of zero rating is of real importance to the sector

18. Dawie Maree dawie@agrisa.co.za 012 643 3400 076 376 9254
Thank you
Dawie Maree