The Cabinet is considering expanding the list of foodstuffs zero-rated for value-added tax (VAT) in a bid to mitigate the effect on poor people of the increase of one percentage point in the rate provided for in the February budget.
Communications Minister Nomvula Mokonyane said this in briefing reporters on the cabinet meeting on Thursday.
There has been an outcry among trade unions and nongovernmental organisations against the increase in the VAT rate from 14% to 15%.
The hike is due to come into effect on April 1 and expected to raise R22.9bn.
VAT does not apply to 19 basic food items, all of which are zero rated. Mokonyane said a team of ministers led by Finance Minister Nhlanhla Nene would look into the possible expansion of the list of zero-rated goods. Consultations would be held with civil society.
She said no time-frame had been set for these deliberations.
There were resounding calls in Parliament by the labour movement and nongovernmental organisations for the increases in the fuel levy and the VAT rate to be rejected.
These calls dovetailed with the campaign of the DA for the VAT increase to be reversed.
The party argues that the revenue shortfall can be made up by freezing increases in 2018-19 public-sector salaries, which would save R38bn.
Other stakeholders who made submissions to the public hearings on the budget organised by Parliament’s two finance committees proposed the zero-rating of more items to protect the poor.
The Congress of South African Trade Unions told MPs it would have expected the government at the very least to announce an increase in the number of basic foods that would now be VAT exempt as a gesture to assist workers to cope with the VAT, fuel and income tax hikes.
The Treasury’s claim that poor people would be cushioned by the zero rating of basic foodstuffs was rejected by the Pietermaritzburg Agency for Community Social Action.
By: Linda Ensor: Business Live