Zero-rated list: Nene yields to pressure

Finance Minister Nhlanhla Nene has yielded to public pressure, amending the terms of reference for the probe into the list of items zero-rated for value-added tax.

Finance Minister Nhlanhla Nene has yielded to public pressure, amending the terms of reference for the independent inquiry into the list of items zero-rated for value-added tax.

This flexibility will enable the panel of inquiry to make proposals that may alter the fiscal framework for the 201920 financial year and beyond. Its proposals could be taken into account in the 2019 February budget. The panel will also be able to consider zero-rating nonfood items to provide relief to poor and low-income households.

The current VAT system allows for 19 basic food items to be taxed at a rate of 0% but there have been calls for nonfood items such as paraffin and sanitary products for women to be included.

Nene’s decision follows the views expressed during public hearings held by Parliament’s finance committee and by civil society organisations on the increase of the VAT rate from 14% to 15% in the February 2018 budget as from April 1.

This increase is expected to raise R22.9bn in tax revenue.

The original terms of reference required the independent panel of experts under chairwoman Prof Ingrid Woolard to review the current list of zero-rated items and consider the most effective way to mitigate the impact of the increase in the VAT rate on poor and low-income households.

On Tuesday, the Treasury said that the terms of reference relating to how government expenditure programmes could assist poor and low-income households had been broadened to allow further comments and suggestions from the panel.

Because of these adjustments and at Woolard’s request, the deadline for the final report of the panel has been extended to July 31 2018, with public submissions extended to June 1.