‘Tinkering with VAT not best way to help the poor’

The government should stop tinkering with zero-rating the VAT system and rather focus its efforts on regulating food prices and increasing wages and social grants.

This is according to Julie Smith‚ founder of the Pietermaritzburg Economic Justice and Dignity Group‚ who said the food crisis is much bigger than simply tinkering with zero-rating.

“Households don’t have enough money to put food on the table‚ which is leading to a massive health crisis,” she said.

“We need to look beyond the VAT angle to see how we can make food in the country more affordable.”

She was responding to the release on Friday of a report on zero-rating additional items.

The report was prepared by a panel of experts led by Stellenbosch University professor Ingrid Woolard.

It recommended that white bread‚ bread flour‚ cake flour‚ sanitary products‚ school uniforms and nappies be zero-rated from VAT in addition to the 19 items already zero-rated.

The panel estimated that its recommended items would represent a fiscal loss of about R4-billion in VAT revenue.

The panel was appointed to look into zero-rating additional items to mitigate the effect on the poor of the one-percentage-point increase in VAT from 14% to 15%‚ which took effect from April 1.

The VAT increase has been opposed strongly as a retrogressive measure. –