The list of food products the government plans to free from value added tax (VAT) was disappointing and would not help low-income households as much as was hoped, according to tax expert Charles de Wet.
De Wet led the team at law firm ENS that prepared a submission on behalf of chicken producers and importers arguing for the removal of VAT from frozen chicken and from offal products such as chicken heads, feet and livers.
He was commenting to News24 on details of proposed VAT-free food products contained in draft tax legislation prepared to give effect to last week’s budget speech by finance minister Enoch Godongwana. The budget, and the draft tax legislation, still have to be approved by parliament.
The list in the draft legislation contained more details than the budget speech. Godongwana promised to support vulnerable households by “Expanding the basket of VAT zero-rated food items to include canned vegetables, dairy liquid blends, and organ meats from sheep, poultry and other animals.”
News24 said the draft tax bill excluded most canned vegetables from VAT zero-rating.
“Proposed additions include canned dried or green beans and fresh and dried canned peas. The established staple, beans, will remain on the zero-rated list,” it said.
“Other proposed additions include products broadly considered to be edible offal, such as tails, ears, tongues, intestines, heads, and trotters of domesticated cattle, sheep, pigs, and goats. The draft bill also includes livers, hearts, kidneys, and soup and marrow bones.”
De Wet said the list of canned vegetables was “a bit disappointing”.
“It is a much narrower scope than we understood the zero rating to be. The impact on households is that the additional zero ratings will have a much smaller positive financial impact, especially on poorer households,” said De Wet.
The government is inviting input from the public on the food items from which VAT will be removed.
National Treasury’s acting head of tax and financial sector policy, Chris Axelson, said the draft bill was published on the SA Revenue Service (SARS) website for public comment. “There are emails for both Treasury and SARS to receive comments. The closing period for comments in 30 March,” he said at a parliamentary meeting last week.
