School kids get ready to get back to school. Picture: ANA Archives
Durban - An independent panel has recommended scrapping VAT on six new items, including white bread and school uniforms.

The advisers, appointed by Minister of Finance Nhanhla Nene, said bread flour, cake flour, sanitary products (tampons and pads), and nappies should be added to the list of 19 food products already zero-rated.

The investigation, including written submissions and hearings, was started after the government increased VAT from 14% to 15% from April 1. This was to have meant a R22.9 billion boost in revenue for the government.

The envisaged new zero-ratings would mean just over R4bn less, the panel found.

It narrowed a list of 66 considered items down to 8, but rejected zero-rating poultry and baby food consisting predominantly of milk. It said the baby formula decision was based on public health recommendations.

The panel couldn’t agree on whether to zero-rate individually quick-frozen poultry parts.

It further urged the Treasury to ensure that the benefit of the new zero-ratings went to consumers and not producers.

The Treasury said the public had until August 31 to submit comments on the panel’s recommendations in writing. Then the minister would decide which of the recommendations to implement.

Nene thanked the nine-person panel, led by Professor Ingrid Woolard, dean at Stellenbosch University’s faculty of economic and management science, for its report, on very tight deadlines.

The panel also proposed in its 91-page report that the government expedite the provision of free sanitary products to the poor, and that the zero-rating of school uniforms be done only if they could be separated from general clothing.

It emphasised the need for definitions on school uniforms.

Ben Modikwe, the KwaZulu-Natal chairperson of the Active Citizenship Movement, said all items people generally bought in supermarkets should be exempt from VAT.

“More should be done to cushion the poor, especially when there are no increases in wages and there are fewer jobs.

“There is lots of money available in South Africa to do this. It could be done if the government cut its expenditure, especially when it comes to what it spends on cabinet ministers, bureaucracy, security,” Modikwe said.

Shoppers at Gem Clothing Pine Street. Picture: Marilyn Bernard
Shoppers at Durban's Gem Clothing in Pine Street. Picture: Marilyn Bernard

The DA said the proposed zero-ratings were underwhelming and would do little to cushion poor households whose spending power has been squeezed by the VAT increase.

“The DA remains firm on its position that the only effective measure to protect the poor and solve the government’s fiscal squeeze will be to scrap the 1% VAT hike and cut expenditure,” said Alf Lees MP, DA finance spokesman.

“The bloated public service, and the public sector wage bill must be frozen, in order to offset the revenue shortfall that may be triggered by the scrapping of the VAT increase.

“The zero rating of additional items will be of marginal benefit to the poor and is not the answer,” Lees said. 

Independent on Saturday