VAT scrapped on essentials

Mboweni announces zero-rating on sanitary towels, cake flour and bread flour from April

THE poor will have a slight reprieve from April next year following an announcement by Finance Minister Tito Mboweni to scrap Value Added Tax on essential items, namely sanitary towels, cake flour and bread flour.

While this will result in revenue loss estimated at R1.2 billion, Mboweni said zero-rating the products “targets the low-income households and restores the dignity of our people”.

Mervyn Abrahams, the programme co-ordinator of the Pietermaritzburg Economic Justice and Dignity Group, welcomed the move, saying it would translate to savings of about R10 per 10kg of cake flour and about R5 on a box of sanitary towels.

Mboweni conceded that the current economic climate had hit the poor the hardest.

“For ordinary South Africans it has become a difficult time. Administered prices, such as electricity and fuel, have risen.

“Unemployment is unacceptably high. Poor services and corruption have hit the poor the hardest,” he said.

While Abrahams congratulated Mboweni for zero-rating the three items, he said the finance minister should have gone further and implemented another recommendation of the independent panel on VAT, which was to increase social grants.

Economist Professor Bonke Dumisa said the zero rating of the three items was not something unexpected as there had been talks about this.

Mboweni also announced that the government would ensure that female pupils had access to sanitary towels.

This programme has already been rolled out in KwaZulu-Natal. “Funds will be added to the provincial equitable share to enable provinces to progressively further this objective.”

Meanwhile, the controversial e-tolls are not going anywhere as Mboweni confirmed the government’s commitment to the user-pay principle. Mboweni said 75% of the non-toll road network was beyond its design life, adding that if the country wanted a road infrastructure that worked, the culture of paying for services would have to be restored.

This announcement didn’t go down well with the Organisation Undoing Tax Abuse, which felt that the new finance minister had missed the mark on e-tolls.

Mboweni further announced that housing subsidies amounting to R1 billion would be centralised to help lowto-middle-income household access affordable home loans which will result in more South Africans acquiring their own homes.

Dumisa described the speech as not exciting, saying the minister had merely rehashed most of the things that had been said before.