Treasury's VAT panel gets better chance to affect budget

Cape Town – Finance Minister Nhlanhla Nene has amended the terms of reference for an expert panel reviewing the list of zero-rated  VAT items, which gives the panel more flexibility to make proposals that could alter the 2019 National Budget.

According to a statement issued by Treasury on Tuesday afternoon, the minister has considered issues raised before Parliament’s standing committee on finance by civil society organisations.

The panel was appointed in April to review the list of zero-rated value-added tax items to soften the impact of a one percentage point hike in the VAT rate from 14% to 15% on poorer and low-income households. 

This increase was implemented on April 1.

The review was meant to consider expanding the list of basic items that are VAT zero-rated, and for the panel to determine how specific expenditure programmes can be improved to better target poor and low-income households, Treasury previously said.

During hearings in April, civil society organisations and unions criticised Treasury’s efforts to lessen the impact on the poor. Neil Coleman, who represented civil organisations, was of the view that the terms of reference were limiting.

The amendments will now give the panel more flexibility to make proposals which may have a bearing on the 2019/20 fiscal framework and beyond.

The panel can also now receive and consider submissions on the zero-rating of non-food items. 

Sections of the terms of reference relating to government expenditure programmes have also been broadened to allow further comments and suggestions from the panel, Treasury said.

As a result of the amendments, the final report's deadline has been moved to July 31, 2018 instead of June 30. In addition, the deadline for public submissions to the panels has been extended to June 1, 2018.

The minister has not altered the composition of the panel, reiterating that it consists of “nine capable, professional and highly regarded experts" equipped to provide “independent fact-based analysis and reporting”.

“The panel is not under any pressure to agree with government policy when making their proposals, and we are assured that they will provide a critical and objective perspective on these issues,” the statement read.

It will merely provide recommendations to the finance minister, who after considering the report, will table a bill in Parliament with the appropriate tax legislative provisions, if necessary.

In that case, Parliament would then have to convene further hearings before the final adoption of the bill.

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