There’s good news and bad news for those hoping to see more essential foods added to the list of items that are exempt from South Africa’s value added tax (VAT).
The good news is that parliament’s standing committee on finance has backed food producers who say a 15% price reduction will help low-income households struggling to make ends meet.
In parliamentary hearings, producers, including the poultry industry, have suggested reinstatement of the additional VAT-free items included in two draft budgets earlier this year. Those budgets both proposed increases to the VAT rate, and were rejected. The third budget, currently being debated, contains no VAT hike and removes the proposed exclusions.
The arguments for the return of the additional VAT-free items succeeded. After the hearings, the committee urged the National Treasury to consider expanding the VAT zero-rated basket, Business Day reported.
The bad news is that not only does the Treasury oppose the idea, but they now have the public support of finance minister Enoch Godongwana. The minister told the Sunday Times that there was no immediate need for additional measures to help the poor, because inflation and interest rates were dropping, easing pressure on incomes.
However, the poultry industry has cited StatsSA reports showing rising poverty levels and food insecurity in poor households. Unemployment has increased since the VAT-free basket was last reviewed in 2018.
Further debate is likely before the budget is passed.
