‘Super tax' on wheat imports may go

The recent announcement by major bread producers of a 40c hike in the price of a loaf of bread has sparked an outcry, with consumer bodies warning that the poor would be most affected.

National Chamber of Milling executive director Jannie de Villiers yesterday questioned the levying of import duties on inputs into basic foodstuffs, equating it to a super tax.

“Despite the fact that we have high bread prices, we still have to pay tariffs on wheat. This translates into a duty of about R50 a ton of wheat and essentially constitutes a 3c super tax on every loaf of bread,” he said.

The trade and industry department's International Trade Administration Commission (Itac), however, announced a review last week of import duties on wheat and wheat flour at the request of the milling chamber, to see if there was a case for maintaining the 2% ad valorem duty on these products.

Under a previous tariff structure, a duty of R18,67/kg took effect if the wheat price fell below $157 a ton. The duty fell away when the wheat price rose above this level. That regime was changed in 2005 to the 2% ad valorem duty, regardless of the wheat price. The tariff regime was changed when wheat prices were relatively low. However, the price of wheat has since risen, translating into substantial tariff payments for SA, which is a net importer of wheat.

De Villiers said the milling chamber had asked Itac to review the tariff, arguing that a percentage-based tariff structure was not suitable for basic food products.

Even wheat producers are in favour of the review. Grain SA senior economist Nico Hawkins said that in the current regime the tariff protection farmers enjoyed was relatively high when they did not need it — when wheat prices were high — while the 2% duty did not offer much protection when wheat prices were low and farmers needed protection against subsided products from countries such as the US.

Reverting to the original tariff structure was preferable, he said. This would also align the tariff structure with the way import duties were levied on maize.

“We welcome the initiative, because it presents an opportunity to change a tariff structure we are also not happy with,” he said.

Abolishing the duties may not translate into lower bread prices, as there was no obligation on millers or bakers to pass the saving on to consumers.

“A different duty structure would undoubtedly lower the total cost of wheat imports, but may not necessarily bring relief to consumers,” Hawkins said.

Article via I-Net-Bridge