Panel appointed to review list of VAT zero-rated products

Finance Minister Nhlanhla Nene has appointed a panel that will review the current list of value added tax (VAT) zero-rated products.

This follows his 29 March announcement to appoint an independent panel of experts – under the Davis Tax Committee – to review VAT zero-rated items.

VAT increased by 1% to reach 15% in April, as announced in the national budget in February.

The panel’s mandate is to review the current list of VAT zero-rated items and consider the most effective way to mitigate the impact of the increase in the VAT rate on the poor.

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

The review will consider expanding the list of basic items that are VAT zero-rated, and consider how specific expenditure programmes can be improved to better target poor and low-income households.

While the focus of the panel will be on food items to be included for VAT zero-rating, it will also identify any other items that should be considered to achieve the policy intention of providing relief to poor and low-income households.

The nine-member panel is expected to deliver an initial report with recommendations to the Davis Tax Committee and the minister by June 30.

The panel will be chaired by Professor Ingrid Woolard. Other members of the panel are Ayabonga Cawe, Professor Ada Jansen, Dr Thabi Leoka, Dr Neva Makgetla, Lynn Moeng, Cecil Morden, Prenesh Ramphal and Professor Imraan Valodia.

The panel will take public comments, convene hearings and engage with different stakeholders from civil society organisations, organised labour and business, and all other interested parties.

The panel will publish further details on its public consultation process.

VAT is the second largest source of tax revenue after personal income tax (PIT). VAT contributed approximately 25.3% to the total tax revenue collected during 2016/17.

Basic food items that are currently zero-rated 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

The basic food items that are currently zero-rated are cultured milk; milk powder; brown wheaten meal.

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