According to National Treasury, a review on the zero-rating of certain foodstuffs for Value-Added Tax (VAT) is expected at the end of July 2018.<\/p>\n
Following this announcement it is necessary to take a step back and see where we are and what can be expected from this review, says Leonard Willemse, senior manager at Mazars.<\/p>\n
The February budget speech saw the announcement that the VAT rate would be increased by one percentage point from 14% to 15% on 1 April 2018 – the first increase in 25 years.<\/p>\n
The announcement came as no surprise as South Africa was in desperate need of additional revenue to address the ever increasing budget deficit, said Willemse.<\/p>\n
“As expected, some concerns were raised by the public and a number of civil organisations. This led to new minister of finance, Nhlanhla Nene announcing on 29 March 2018 that an independent panel of experts – under the Davis Tax Committee (DTC) \u2013 would be appointed to review VAT zero-rated items.”<\/p>\n
The panel – led by Professor Ingrid Woolard – was expected to provide feedback on the current list of zero-rated items and the possible expansion of the list, taking into account the benefit to low-income households; market structure and likelihood of producers passing benefit to customers; ease of administration; potential for abuse; and estimated revenue loss.<\/p>\n
It was expected that the panel would deliver an initial report by 30 June 2018, in time to be considered by Treasury for incorporation in the draft tax legislation.<\/p>\n
However the feedback has been delayed to the end of July 2018, Willemse said.<\/p>\n
What can be expected?<\/strong><\/p>\n Currently there are 19 basic food items on the zero-rated list. It includes, among other items, brown bread, maize meal, samp, eggs and edible legumes.<\/p>\n National treasury called upon the public to make submissions to the panel regarding amendments to the zero-rated list.<\/p>\n Interestingly, National Treasury made it clear that it would be looking beyond foodstuffs and that other products will also be considered to be added to the zero-rated list.<\/p>\n Based on media reports, items that could be considered include:<\/p>\n Apart from expansion of the list, the review panel has also been provided the opportunity to consider how specific expenditure programmes can be improved to better target poor and low-income households, said Willemse.<\/p>\n “One thing is certain, the review panel will be walking a fiscal tightrope to ensure that it does not erode National Treasury\u2019s attempts to reduce the budget deficit.”<\/p>\n\n
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