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Eyewitness News
4 days ago
- Business
- Eyewitness News
Expanding list of tax-free food items won't benefit poorer households: Treasury
CAPE TOWN - The Treasury doesn't believe that expanding the basket of tax-free food items will have the desired effect of lowering living costs for poorer households. It said that past experience has shown it would benefit retailers instead. Along with retracting a proposed value-added tax (VAT) increase in the third version of this year's national budget, Finance Minister Enoch Godongwana announced last week that the Treasury would also no longer be adding more items to the essential list of 21. During public hearings on the budget this week, the South African Poultry Association and dairy manufacturer, Clover SA, appealed to Parliament for chicken and dairy liquid blends to be zero-rated to ward off malnutrition, and to offset the impact of the impending fuel levy increase next week. ALSO READ: But Treasury's taxation head, Chris Axelson, said on Friday that zero-rating was viewed as a "blunt instrument". He said that when the basket was last expanded in 2019, retailers only dropped prices between seven and eight percent and not by the standard VAT rate of 15%. "So the R5 billion that government is losing, about half of that is going to lower-income households, and the benefit of lower prices, and the other half is going either to retailers or the distributors." Axelson said that Treasury believes the current list of zero-rated items was well-targeted to spare poorer households. "If there is no VAT rate increase, we don't believe it is the best course of action to continue with that zero-rating." Axelson pointed out that agricultural producers stood to gain from a diesel rebate to mitigate against increased food prices as a result of the fuel levy hike.
Eyewitness News
6 days ago
- Business
- Eyewitness News
Food industry makes appeal for Godongwana to retract decision not to expand zero-rated food basket
CAPE TOWN - An appeal has been made by the food industry for Finance Minister Enoch Godongwana to retract his decision not to expand the zero-rated food basket, on the grounds of growing malnutrition and food insecurity in the country. When he tabled a revised budget last week, Godongwana reversed the decision to exempt items such as chicken, offal, and dairy liquid blends from value-added tax (VAT), after ditching plans to hike the standard VAT rate. The South African Poultry Association and major dairy producer Clover SA have argued in Parliament on Wednesday that the revenue generated from taxing these items is negligible in the greater context of the national budget. Parliament's finance committees are on Wednesday receiving public input on the fiscal framework, which underpins the budget and the money bills. The poultry association's chief executive officer, Izaak Breitenbach, said excluding chicken portions and offal from the tax-free basket should be reconsidered as a matter of health. 'The increase in consumption of chicken should increase the ability of South Africans to reach daily protein targets, preventing stunting and growing malnutrition, especially in our children.' Clover's business unit head, Jani Menikou, has also argued that dairy liquid blends are crucial for poorer households and to prevent stunted growth in children. 'While the VAT rate was not increased, the burden on the vulnerable household remains unchanged. Dairy liquid blends were designed specifically to support these families, and it's still unfairly taxed.' The organisations have appealed to Parliament to put people before policy by expanding the zero-rated food basket of 21 items, which has remained unchanged since 2018.
