A welcome VAT relief
THE final report by the ministerial panel of experts investigating the expansion of zero-rated value-added tax items is out for comment, and the public has 16 days to weigh in on the recommendations.
Finance Minister Nhlanhla Nene appointed the panel following the increase in the VAT rate from 14% to 15% in April. The panel, chaired by Professor Ingrid Woolard of Stellenbosch University, was mandated to review the current list, consider additions and other measures to lessen the impact of the VAT increase on poor households.
In South Africa, 19 items currently attract no VAT – brown bread, maize meal, samp, mealie rice, dried mealies, dried beans, lentils, canned pilchards/sardines, milk powder, dairy powder blend, rice, vegetables, fruit, vegetable oil, milk, cultured milk, brown wheat meal, eggs, edible legumes and pulses of leguminous plants. This list has not been revised for the last 25 years.
Woolard’s panel has recommended that white bread, bread flour, sanitary products, school uniforms, nappies and cake flour be added to the list of items that don’t attract VAT at the till.
The VAT increase, which came on the back of other hikes such as the general fuel levy, has met with strong opposition from opposition parties, trade unions and NGOs.
The panel has raised eyebrows by, among others, recommending zero-rating white bread, for instance, while overlooking frozen chicken, a staple protein for millions of poor households.
The experts considered 66 items for zero-rating – including books, mango atchar, broadband internet access, noodles and yoghurt, and VAT on rent, water and electricity.
Zero-rating of sanitary products will no doubt get the thumbs-up. Millions of girls miss several weeks of schooling every year because they don’t have money to buy sanitary pads.
Still, questions abound. Such as, under present circumstances, would VAT relief significantly benefit poor households, and are there better options to assist the poor, like strengthening the national school nutrition programme, and increasing child support grants and oldage pensions? Poverty, worsened by rampant unemployment, is a constant affliction for millions. Compassion is a vital requisite.
Comments must be submitted by August 31 to vatsubmissions@treasury.gov.za