NEWS ANALYSIS: Rich households ‘will benefit more’ than the poor from zero-rating
The loss to the fiscus of zero-rating the recommended items is conservatively estimated at about R4bn, writes Linda Ensor
Considering which goods should be zero-rated for VAT is not only a question of how the poor will benefit. But this was an overriding concern of the independent panel of experts appointed by the Treasury to review the list of 19 items zero-rated in the VAT regime. The panel, which submitted its report to finance minister Nhlanhla Nene last week, was appointed after the outcry over the one percentage point VAT hike announced in the budget. Opponents said the measure would hit the poor hard. The panel, led by Stellenbosch University professor Ingrid Woolard, had a tricky balancing act which took into account not only the absolute and proportional benefit of zero-rating certain products to low-income households compared to other sectors of society. It also had to consider the potential loss to the fiscus of doing so; the likelihood of producers and retailers passing on the benefit to consumers particularly in highly concentrated markets; the ease of administration; and the potential for...
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