There is some good news for consumers who are being strangled by the economy: essential items such as sanitary towels, school uniforms and nappies (both infants and adults) will be exempt from value-added tax.
But the Democratic Alliance believes that the decision by the independent panel on the review of the current zero-rated items to add only eight items to the list was underwhelming and would do little to cushion poor households “whose spending power has been squeezed by the 1 percentage point VAT increase announced in the 2018 national budget”.
Finance Minister Nhlanhla Nene today released the report by the independent panel, which was appointed after the announcement in the budget in February of the increase in the rate of value-added tax from 14% to 15% effective from April 1.
The report, which was submitted to the minister on Monday, recommended that the following items be zero-rated:
• White bread, bread flour and cake flour;
• Sanitary products;
• School uniforms; and
• Nappies, including cloth and adult nappies.
The panel also recommended that the government should 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.
The DA’s Alf Lees said the party remained firm on its position that the only effective measure to protect the poor and solve the government’s fiscal squeeze would be to scrap the 1% VAT hike and cut expenditure.
“The bloated public service, and the public sector wage bill must be frozen in order to offset the revenue shortfall that may triggered by the scrapping of the VAT increase,” said Lees.
“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.”
Leese maintained that fuel price hikes were already adding to the cost of living for poor households “and it was essential that the government focuses on cutting its own fat rather than adding more demands on their meagre incomes.”
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