Uniforms, nappies on list for VAT exemption
The advisers, appointed by Minister of Finance Nhanhla Nene, also said bread flour, cake flour, sanitary products and nappies should be added to the list of 19 food products already zero rated.
The investigation was started after the government increased VAT from 14% to 15% on April 1.
This was to have meant a R22.9billion boost in revenue for the government, but the envisaged new zero-ratings would mean just over R4bn less for the state, the panel found.
The panel narrowed a list of 66 items down to eight, but rejected zero-rating poultry and baby food consisting predominantly of milk.
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 in writing. Then the minister would decide which of the recommendations to implement.
Nene thanked the nine-person panel, led by Professor Ingrid Woolard, for its report.
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.
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 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 spokesperson on finance.
“The bloated public service and the public sector wage bill must be frozen 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.
"The revenue lost will be recovered elsewhere and this will, in any event, end up being paid by the poor,” he said.
The 19 basic food items currently zero-rated are:
* maize meal
* brown bread
* dried beans
* vegetable oil
* mealie rice
* pilchards in tins
* cultured milk
* dairy powder blend
* milk powder
* dried mealies
* brown wheaten meal