Price of chicken in markets would not fall despite IGV exemption for basic necessities

The president of the Peruvian Association of Poultry (APA), Julio Favre, warned that the price of chicken and eggs in markets will not be reduced, despite the approval of the tax exemption General Sales (IGV) on products from the basic basket. He noted that prices for these products could even end up rising.

“In the popular market, which is what this law is supposed to be aimed at, it will not be changed because the law, as it stands, does not affect the chicken that goes to those markets. It's not going to move a penny,” Favre said on Canal N.

The poultry industry explained that a possible adverse effect would occur because the text of the opinion did not add the collection of VAT paid on inputs, raw materials, intermediate goods and services used in its production. Therefore, this amount would become a cost in the production chain and could affect the final price.

In addition, the standard only considers major inputs as a tax credit. This would cause other inputs and services, which would reach 40% of the total value, to be charged at the price of the product in markets.

On the other hand, IGV is not exonerated for live chicken, which is 90% of that consumed in the country and is sold in the markets. Only processed chicken is contemplated.

“The rule favors the importer of frozen chicken; that is, those who sell through supermarkets,” Favre said on another occasion.

In this way, the APA argues that the exemption should be included throughout the supply chain, so that the price is reduced. In addition, the representative expressed the view that it would have been more effective to provide a direct subsidy to the neediest families.

SPECIFICATIONS OF THE NEW LAW

Yesterday, the plenary session of the Congress of the Republic approved the opinion on the search of the comments of the Executive Branch, which establishes the exemption from the General Sales Tax ( IGV) to food products from the basic basket.

It was supported by a total of 95 congressmen, while 10 spoke out against it and three voted for abstention.

It is recalled that the Executive Branch had observed the law, since they added products that did not belong to the basic basket. The category of poultry (including pheasant), pasta (including ravioli) and beef (including thin loin) was “generalized”; in addition to extending the benefit to other products such as concentrated milk.

Thus, among the main changes is that only chicken, egg, noodles, bread and sugar are exonerated. The original MEF proposal exonerated chicken, egg, noodles, flour and “meat products”.

The measure will be in effect until July 31, 2022, and applies from May 1, 2022. This was the original deadline proposed by the Executive, unlike the autograph of the Legislative, which extended it until December 31.

It was also stated that the accumulated tax credit (VAT paid on purchases) will not be refunded on all raw materials, inputs and other goods and services used in the production process. However, traders will be able to use the VAT tax credit paid for “the main inputs required in the production process of the exonerated goods, which will be determined by a supreme decree endorsed by the MEF”. This does not include the return of the accumulated balance.

The Executive Branch will no longer be forced to form a Multisectoral Commission to assess the reduction of food costs in the Amazon. This is because the exemption will apply in this area, since goods and services that come from companies not incorporated in that region are taxed with this tax.

Finally, SUNAT's obligation to monitor the final consumer sales prices of the exonerated goods was also eliminated. This was decided because this task corresponds only to INDECOPI.

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