Cosatu slams VAT panel

Submissions on the VAT panel’s report to parliament yesterday ranged from pleas to exempt chicken to imposing a special value added tax of up to 20% on luxury goods.

The latter came from the Congress of South African Trade Unions (Cosatu), which said it was disappointed that no concessions had been made to the poor on essentials, including water and electricity.

Cosatu parliamentary representative Matthew Parks told the standing committee on finance there should be a “progressive sliding VAT regime for water and electrcity for poor and workingclass households”.

He said the trade union federation viewed the panel’s failure to propose this as a glaring ommission.

Parks also wanted a time limit to be imposed on the 1% hike in VAT, the country’s first in 25 years, implemented in April. He added that Cosatu believed the panel should have called for the VAT hike to be rescinded. The increase to 15% was meant to bring the state an extra R22.9 billion in revenue.

But Parks called it a regressive tax that was making the poor pay for the loss of state revenue to corruption. “The real solution to the budgetary crisis is to stop the looting and wastage and recover stolen taxpayers’ monies.”

Lobby group FairPlay’s Lionel Adendorf urged Parliament to propose the inclusion of chicken on the list of items that will be added to the zero-rated basket.

The VAT panel estimated that zero-rating poultry would result in a tax break of about R6 billion to the consumer but could not reach consensus on the issue, instead deferring it to members of parliament.

Adendorf argued that it was the preferred form of protein for the poor and an exemption would help prevent malnutrition.

The SA Poultry Association conceded there would be a cost to the state but said it would boost an industry that employs 130 000 people. The association said in a submission to the committee that it would ensure any VAT savings as a result of the zero-rating of chicken products “are passed on to our consumers”. It estimated that zero-rating and the resultant price drop would lead to a demand increase of 7.8%, which would create some 11 000 jobs.

The committee also heard a plea to zero-rate basic medicines, saying if the poor could not afford medicine they would skip clinic visits, leading to more people with health complications, which would place a greater burden on the health sector.

The VAT panel recommended zero-rating be extended to white bread, flour, nappies, sanitary towels and school uniforms.

Finance Minister Nhlanhla Nene will consider public submissions and those of the Treasury and the revenue service before deciding which recommendations to implement. – ANA