Telling empowering stories, South Africans want to hear

Monday, 09 October 2023 15:56

National Treasury won't exempt list of zero-rated VAT food items.

By Lehlohonolo Lehana.

Minister of Finance Enoch Godongwana says his position still stands that they will not extend the basket of food items to be zero-rated in a bid to mitigate the cost of living for the poor.

The call to expand the country's zero-VAT-rated basket of food items comes as many South Africans feel the pinch of food prices that have risen significantly over the past year.

Several food items that are zero-VAT-rated, includes brown bread, maize meal, rice, vegetables, milk, vegetable oil, eggs and more.

Godongwana said their position has not changed after the independent panel report in 2018 found that extending zero-rated food items would be inefficient. 

"The position of the Minister has not changed since the last oral reply. As indicated then, zero-rating of specific foodstuffs provides a larger proportional benefit to the poor (that is, progressivity is enhanced). Overall, goods have a progressive impact and a strong equity-gain ratio – poor people consume a relatively high share of zero-rated items. Nevertheless, the analysis of the independent panel in 2018 indicated that extending zero-rating to further food items would be inefficient, since high-income households tend to benefit more from such measures," said Godongwana.

Godongwana was replying to a written parliamentary question from Dion George of the DA, said they will not change this position.

The latest Household Affordability Index by the Pietermaritzburg Economic Justice & Dignity group (PMBEJD) shows that food prices in September 2023 are about 7.3% more costly than in 2022.

The group tracks a basket of 44 commonly-bought food items totalling R5,155.77 in September 2023, around R349.91 more expensive than the same basket in 2022.

Additionally, the PMBEJD data showed that zero-rating products are still seeing notable increases despite being exempt from Value-added tax.

Godongwana said if they extended the food basket of zero-rated food items it would benefit high-income families.

The minister also said they were extending support to the agriculture sector to fight food insecurity.

There were concerns that the country could face food insecurity and the president called for a plan to deal with this.

Meanwhile Treasury is reported to have advised President Cyril Ramaphosa that a raise in VAT by 1% to 2% is required for government to generate more revenue for itself.

George says South Africans already shoulder an immense tax burden and will not tolerate any increase in tax, VAT included. It is concerning that, instead of reigning in irresponsible Government spending, the default response appears to be more taxation.

While headline inflation might have shown signs of stabilising to within the South African Reserve Bank's (SARB) target range, price pressures on essential items remains worrisome, and consistently outpaces general inflation. More specifically, food prices continue to soar at an alarming rate. Government does not seem to care that the poorest 40% of South Africans bear the brunt of these escalating costs, added George.