How to cope with the VAT hike

The recent tax in­crease is a big blow to con­sumers - but there are ways to save and make life more af­ford­able

YOU (South Africa) - - CONTENTS - BY JAC­QUES MYBURGH & MARLISE

IT’S noth­ing short of de­press­ing. In the days lead­ing up to 1 April South Africans’ cell­phones pinged with mes­sages from ser­vice providers in­form­ing us we’d be pay­ing more for just about every­thing af­ter the VAT in­crease came into ef­fect. This is the first time since the dawn of democ­racy that VAT has gone up, ris­ing from 14% to 15% as the gov­ern­ment scram­bles to find a way to pay back its R23 bil­lion debt to the World Bank.

This means the price of many of the prod­ucts we eat and drink have gone up too, stretch­ing cash-strapped con­sumers even fur­ther ev­ery time they set foot in a su­per­mar­ket.

There has been much crit­i­cism of the VAT hike, which will hurt the poor the most.

But econ­o­mist Mike Schüssler says the gov­ern­ment has ex­hausted other rev­enue streams, such as in­come tax and com­pany tax, which are al­ready stretched to the limit.

“VAT is one of the ‘eas­ier’ streams of rev­enue be­cause it’s tax that’s levied on prod­ucts con­sumed by the gen­eral pub­lic,” he says.

“The prob­lem is we have a low eco­nomic growth and the gov­ern­ment isn’t curb­ing spend­ing.”

Rob van der Westhuizen, a mar­ket re­searcher at credit bureau Com­pus­can, says the hike will be dev­as­tat­ing to a broad sec­tion of South Africans.

“Due to the cur­rent eco­nomic cli­mate and high lev­els of poverty and un­em­ploy­ment the rise will have a huge im­pact on many house­hold bud­gets.”

Now is the time to be more cent-savvy than ever.

What is VAT ex­empt?

The gov­ern­ment has ex­empted 19 ba­sic food­stuffs from VAT (see page 92 for the full list), in­clud­ing brown bread, mealie meal, rice, dried beans and lentils, canned pilchards, milk, eggs, fresh fruit and veg­eta­bles and veg­etable oil.

VAT is also not charged on non-fee-re­lated fi­nan­cial ser­vices such as in­ter­est, life in­sur­ance pre­mi­ums, med­i­cal scheme pre­mi­ums and pen­sion and re­tire­ment an­nu­ity fund con­tri­bu­tions. But ser­vice fees are taxed, which is why your bank charges have gone up.

Ed­u­ca­tional ser­vices pro­vided by the state or ap­proved in­sti­tu­tions are also VAT-free. This means fees at all reg­is­tered crèches, schools, af­ter-school ser­vices, uni­ver­si­ties and col­leges won’t go up.

Res­i­den­tial rental ac­com­mo­da­tion is also VAT ex­empt – so if your land­lord or land­lady tries to raise your rent by 1% you can tell them it’s il­le­gal.

But the same doesn’t ap­ply to hol­i­day rental ac­com­mo­da­tion – the tax on this will go up to 15% as it’s a ser­vice provid-

ed by a third party. And if you have a com­pany that leases or sells prop­erty, you have to pay VAT, Schüssler says.

WHAT CAN YOU DO TO COPE? Buy smart

Re­think the con­tents of your fridge and cupboards, ad­vises Sonelle van der Linde of the As­so­ci­a­tion of Di­etet­ics in SA.

Meat and poul­try might have been goto pro­teins in the past but items on the ex­empt list can pro­vide you and your fam­ily enough pro­tein for less money.

Eggs, dried legumes (such as beans, lentils, chick­peas and soy) and pilchards are high in pro­tein. Peanuts and peanut but­ter – while not VAT ex­empt – are also an af­ford­able source of pro­tein, she says.

“Fo­cus on other VAT-free foods too such as fruit and veg­eta­bles and brown bread. When it comes to mealie meal, the gov­ern­ment stip­u­lates it must be for­ti­fied, so im­por­tant nu­tri­ents such as vi­ta­min A, iron and zinc will be plen­ti­ful in your diet if you in­clude this sta­ple.

“The gov­ern­ment keeps healthy and es­sen­tial foods VAT-free to en­cour­age peo­ple to buy these prod­ucts, which is a good ges­ture on their part.”

Change it up

Get VAT wise. For ex­am­ple: A loaf of white bread costs R1 more than VAT-free brown bread. A 119g can of tuna costs R19* as op­posed to R9 for a 155g can of VAT-free pilchards in tomato sauce. A 410g can of baked beans in tomato sauce costs R8,99 while a 500g packet of

Cook clever

Five cans of 400g pilchards at R16,99 each cost less than 1kg of mince (around R92,99) – and you can make many more meals with 2kg of pilchards than you can with 1kg of mince, Van der Linde says.

Pilchards are great in pies, kedgerees and pasta dishes and are loaded with pro­tein and healthy fats (see recipes on the next page).

If your fam­ily are des­per­ate for red meat, bulk up 500g of mince with beans, lentils and veg­eta­bles.

MORE WAYS TO SAVE

If you’re bat­tling to make ends meet, take a look at things such as your DStv pack­age, Van der Westhuizen says.

Con­sider switching from a full bou­quet, which costs more than R800 a month, to the cheaper DStv Fam­ily bou­quet at R249 a month. You’ll still have ac­cess to 75 chan­nels at a sav­ing of more than R500 a month.

If you have a gym mem­ber­ship, con­sider chang­ing it to a cheaper ver­sion. Vir­gin Ac­tive clubs, for in­stance, offer more af­ford­able monthly pack­ages if you’re able to work out dur­ing off-peak hours, or if you stick to one gym near you in­stead of opt­ing for the all-gyms pack­age. Charges start at R225 for limited ac­cess, com­pared with up to R900 for full ac­cess.

Ex­am­ine your cell­phone con­tract. If you find you don’t use all the data you have on your pack­age, speak to your ser­vice provider about switching to a cheaper pack­age.

Also con­sider can­celling your con­tract when it’s up for re­newal and go­ing on the pay-as-you-go op­tion in­stead. You’ll have more con­trol over what you spend.

And you don’t have to go for a more ex­pen­sive phone when you’re due for an up­grade if your old phone is still in good work­ing or­der – many ser­vice providers will re­duce your pay­ments if you stay with your old phone when you re­new your on con­tract. *Prices ap­prox­i­mate at the time of go­ing to print. YOU shopped around to ob­tain a gen­eral av­er­age of prices. EX­TRA SOURCES: NETWERK24, STA­TIS­TICS SA, MONEY­WEB

Al­to­gether 19 food­stuffs are ex­empted from VAT, in­clud­ing canned pilchards, eggs, brown bread and veg­eta­bles such as pota­toes. VAT-free dried beans costs R14,99 – but goes much fur­ther than a sin­gle can of beans.

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