WASHINGTON, D.C., U.S. — The Moroccan government has agreed to reduce the value added tax (VAT) from 20% to 7% on corn co-products such as DDGS (distiller's dried grains with solubles) and CGF (corn gluten feed), the U.S. Grains Council (USGC) said on Aug. 23.
Beginning in June 2011, the U.S. Grains Council invited the president of AFAC (Morocco's Feed Miller Association) along with Moroccan government officials to travel to the United States on a Council sponsored team of several key Moroccan beef and dairy industry players. This trip sparked the discussion on the need to reduce the VAT on DDGS and CGF and allow for lower prices of these products for use by Morocco's beef and dairy industries.
With the council's guidance, AFAC presented their argument to the custom department within the Ministry of Finance, against the two customs 'circulars.' One circular stating that all feed ingredients should pay 7 percent VAT, while the other set a 20% VAT on DDGS, CGF, and other corn co-products.
"AFAC members were losing money due to the fact that they were forced to pay a 20% VAT on imported DDGS and CGF, but only pass long a 7% VAT on finished feed products. As a result, for every kilogram of DDGS used, they lost 13% on VAT recovery – a loss that has added up to over $50 million industry wide in the past couple years," said Cary Sifferath, U.S. Grains Council Mediterranean and Africa regional director.
AFAC had already succeeded in reducing the VAT rate for four other products (including phosphate and choline) using the same argument in the past, but initial attempts to introduce the VAT reduction on corn co-products within the 2012 Budget Law failed. The pressure of increasing world grain and feed ingredient prices helped move the issue along, as VAT on all co-products in Morocco is now set at 7 percent. Through active involvement, the Council was able to facilitate a smoother purchase of U.S. co-products in Morocco.
Morocco is currently the second largest importer of U.S. CGF and 10th largest importer of U.S. DDGS. In 2011, Morocco imported 75,000 tonnes of CGF and 168,000 tonnes of DDGS. So far this year through June, Morocco has imported 77,000 tonnes of CGF and 83,000 tonnes of DDGS. The ccouncil anticipates the reduction in VAT will help to foster increased sales of these products.