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Cabinet considers expanding VAT zero-rated basket

Mar 2, 2018
Cabinet considers expanding VAT zero-rated basket

Following an outcry over the 1% Value Added Tax (VAT) increase proposed by former Finance Minister, Malusi Gigaba, in his 2018 Budget Speech, Cabinet announced that it is considering expanding the list of basic goods that will be zero-rated to cushion consumers - especially the poor.

Welcoming the confidence expressed in the 2018 national Budget tabled last week, Cabinet said it is looking at the possibility of adding additional items to the list of VAT exempted goods.

South Africa’s VAT system includes 19 basic food items that are zero-rated. These are:

  • dried beans
  • samp
  • maize meal
  • rice
  • brown bread
  • vegetables
  • fruits
  • vegetable oil
  • mealie rice
  • pilchards in tins
  • edible legumes and pulses of leguminous plants
  • eggs
  • milk
  • dried mealies
  • dairy powder blend
  • lentils
  • cultured milk
  • milk powder
  • brown wheaten meal

“As a response to the concern raised on the VAT increases proposed, Cabinet is considering expanding the list of basic goods that are zero-rated on VAT,” said new Communications Minister Nomvula Mokonyane on Thursday.

Briefing media in Cape Town following the first Cabinet meeting following the appointment of President Cyril Ramaphosa, to the top office new Communications Minister Mokonyane said the issue of VAT was raised at Wednesday’s meeting.

“What was actually raised is that we definitely need to reflect but also unpack and give more clarity around the issues of VAT. One of the key considerations is the addition of items that must be zero rated,” said Minister Mokonyane in response to a question.

The R1.67 trillion Budget tabled by former Finance Minister Malusi Gigaba in the National Assembly last week raised VAT by a percentage point to 15%.

VAT had previously been pegged at 14% since 1993.

Minister Mokonyane -- who was appointed to the Communications portfolio following a Cabinet reshuffle on Monday -- called on all South Africans to partner with government to grow the economy and create much-needed jobs.

Cabinet said the reduction in expenditure of R85 billion over the next three years demonstrates government’s commitment to fiscal consolidation and the prudent allocation of resources to grow the economy.

“The steps announced to slow the pace of debt accumulation and contain the budget deficit greatly improve our fiscal framework and give South Africans confidence in the future prospects of our economy,” said Minister Mokonyane.

This as the budget states that net debt is expected to stabilise at 53.2% of Gross Domestic Product (GDP) in 2023/24.

“Cabinet is resolute that the interventions will reflect in our country’s economic growth, affirm its economic standing and safeguard its investment grade status. The 2018 National Budget supports the poor in our society through a comprehensive social assistance programme and fee-free tertiary education for students from poor households,” she said.

In the budget, R324 billion is provided for higher education and training including R57 billion of new allocations for free-fee higher education and training.

The allocation for free-fee higher education follows on former President Jacob Zuma’s December 2017 announcement of the introduction of free higher education for the poor.

Government will phase in fee-free higher education and training to students from poor and working-class families. – additional reporting SAnews.gov.za