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A welcome VAT relief

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In South Africa, 19 items currently attract no VAT

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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 poorer 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.

Prof 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 do not 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, yoghurt and VAT on property, rent, water and electricity.

Zero-rating of sanitary products will no doubt get the thumbs up. Millions of girls miss several weeks of schooling a year because they do not have money to purchase sanitary pads.

Still, questions abound. Such as, under present circumstances, would a VAT relief significantly benefit poor households, or whether there are better options to assist the poor like strengthening of the national school nutrition programme and increasing child support grant provisions and old age pensions. Poverty, worsened by rampant unemployment, is a constant affliction for millions. Compassion is a vital requisite.

Comments must be submitted to [email protected] by August 31.