PRETORIA– South African Finance Minister Nhlanhla Nene has appointed a panel to review the current list of zero-rated products under the Value-Added Tax (VAT) regime in order to find the most effective way to mitigate the impact of the increase in the VAT rate on poor and low-income households..
South Africa’s VAT rate was raised one percentage point to 15 per cent with effect from this month, as announced in the national Budget tabled in Parliament in February.
The Treasury said in a statement here Wednesday that the review process should be carried out within the confines of the current Fiscal Framework, as proposed in the 2018 Budget, including for revenue and expenditure.
Currently, South Africa’s VAT system includes 19 basic food items which are zero-rated. They are: dried beans, samp, maize meal, rice, brown bread, vegetables, fruits, vegetable oil, mealie rice, pilchards in tins, edible legumes and pulses of leguminous plants, eggs, milk, dried mealies, dairy powder blend, lentils, cultured milk, milk powder and brown wheaten meal.
The review will consider expanding the list of basic items that are VAT zero-rated, and consider how specific expenditure programmes can be improved to better target poor and low-income households. The nine-member panel is expected to deliver an initial report with recommendations to the Davis Tax Committee and the Minister by June 30, 2018.
The panel will take public comments, convene hearings and engage with different stakeholders from civil society organisations, organised labour and business, and all other interested parties. The panel will publish further details on its public consultation process.
VAT is the second largest source of tax revenue after personal income tax (PIT). VAT contributed approximately 25.3 per cent to the total tax revenue collected by government during 2016/17.
Source: NAM NEWS NETWORK