Finance Minister Nhlanhla Nene has appointed an independent panel of experts to review the list of zero-rated VAT items.
This comes after National Treasury heeded recommendations made to Parliament in February by civil society groups and trade unions following the announcement in the National Budget that the VAT rate would be increased by one percentage point from 14% to 15%. Cabinet also previously called for a review of items that are exempt from VAT.
The increase was implemented countrywide on April 1.
“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 poor and low-income households,” National Treasury’s said in a statement.
“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.”
The review process will be conducted "within the confines of the current fiscal framework". The VAT rise is expected is expected to raise an additional R22.9bn for SA's coffers.
According panel's terms of reference, it will investigate a number of questions including whether the current list of 19 VAT free items should be expanded, whether the correct items are on the list, and whether the categories on the list are "too broad".
It will also investigate whether the state's intended outcome of a zero VAT rating of food items - relief for poor households - could be better achieved by a government expenditure programme.
In effect, the panel will need to determine if a government expenditure programme could be more efficient in targeting poor and lower income households than making certain food items VAT exempt, and whether existing government programmes can be “better tailored” to achieve the same or better outcome.
The panel will be chaired Professor Ingrid Woolard, the dean of the faculty of commerce and professor of economics at the University of Cape Town.
Other members include development economist Ayabonga Cawe, associate professor in economics at Stellenbosch University Ada Jansen, economist Dr Thabi Leoka, senior economist Dr Neva Makgetla, chief director for health promotion, nutrition and oral health Lynn Moeng, independent analyst and consultant Cecil Morden, senior manager at SARS in the legal counsel unit Prenesh Ramphal, and Professor Imraan Valodia, the dean of the faculty of commerce, law and management at Wits University.
Submissions will be considered between April 24 and May 11.
The panel has been given the deadline of June 30 to deliver its initial report with recommendations to Davis Tax Committee and the finance minister. The report will then be published.
* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER