The VAT review panel has recommended that sanitary products be added to the current list of zero-rated items.
The panel recommended that sanitary products, school uniforms, nappies (including cloth and adult nappies) as well as white bread, bread flour and cake flour be added to the list of Value Added Tax (VAT) zero-rated products.
Finance Minister Nhlanhla Nene on Friday released the report by the Independent Panel on the review of the current list of items that are zero-rated for VAT purposes, for public comment.
The public has until by 31 August 2018 to submit their comments.
The Minister appointed the panel after the announcement in the national budget in February of the increase in the rate of VAT from 14% to 15% effective from 1 April 2018.
Currently, the zero-rated list consists of 19 items, which include dried beans and samp.
The nine-member panel submitted its report on Monday after it was granted an extension to the deadline from 31 July to 6 August 2018.
The panel further recommends that 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 can be separated from general clothing.
For each of the recommended items, the panel suggests that National Treasury does further work to ensure that the benefits of zero-rating accrue to consumers and are not captured by producers.
The report also highlights some programmes on the expenditure side, which would assist poorer households, such as strengthening the National School Nutrition Programme and increases in the Child Support Grant and Old Age Pension.
Public hearings and implementation
The panel’s report, said Treasury, provides the Finance Minister with a set of recommendations that are subject to further public comment, including comments to be made during Parliamentary hearings.
“Taking the recommendations and the public comments, as well as the evaluation of the recommendations by National Treasury and the South African Revenue Service (SARS), the Minister of Finance will then decide which of the panel’s recommendations to implement.
“Some of the changes may still be included in the draft tax legislation that is currently being processed by Parliament’s Standing Committee on Finance,” Treasury said.
Treasury said comments in response to the panel’s recommendations would be helpful if they included consideration whether:
- The recommendations will significantly benefit poor households, and whether such benefit can best be achieved through other means, for example, through government expenditure programmes;
- All significant aspects of the revised terms of reference dated 29 May 2018 have been explored in the report;
- The panel’s recommendations are consistent with other relevant government policy objectives (e.g. that the food items recommended for zero-rating are consistent with the Department of Health’s policy on nutrition); and
- The recommendations are consistent with the fiscal framework adopted by Parliament.
The public can make their inputs ahead of the 31 August deadline by submitting their comments in writing to firstname.lastname@example.org.
The Minister further thanked the panel for the report, which was prepared under tight deadlines.
Chaired by Professor Ingrid Woolard, the panel was mandated to evaluate the current list of zero-rated food items and consider the inclusion of additional zero-rated items, as well as consider other measures (i.e. expenditure programmes) to mitigate the impact of the VAT increase on poorer households.