A panel set up by South Africa’s national treasury in April to look into what additional products should be Value-Added Tax (VAT) free has concluded its findings.
The panel has proposed the following products be added for zero rating:
- white bread, bread flour and cake flour;
- sanitary products to address the unfair gender tax currently imposed on sanitary products through the imposition of VAT;
- school uniforms, notwithstanding the important definitional issues; and
- nappies for babies, cloth nappies and adult nappies.
If approved this would provide VAT relief to households in deciles 1 to 7 of approximately R2.8 billion.
The report also provides alternatives to VAT zero rating, including:
- Lower positive VAT rates on some items;
- Increases in all the monthly social grants, including the old age social pension;
- Food vouchers – where cash grants might not be feasible or practical
- Upscaling the various feeding schemes (eg, the National Schools Feeding Scheme, including pre-school (ECD)); and
- The provision of free sanitary pads to girls and poor women.
The independent panel of experts, under the Davis Tax Committee, was set up in April to review the current list of VAT zero-rated items following the increase in the VAT rate from 14 to 15 per cent which took effect on 1 April.
The panel’s mandate was to review the current list of VAT-zero rated items and consider the most effective way to mitigate the impact of the increase in the VAT rate on poor and low-income households.
The panel chaired by Professor Ingrid Woolard also comprised Ayabonga Cawe, Professor Ada Jansen, Dr Thabi Leoka, Dr Neva Makgetla, Lynn Moeng, Cecil Morden, Prenesh Ramphal and Professor Imraan Valodia.
The recommendations are open for public comment until close of business on 31 August 2018 and can be submitted to [email protected]