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Treasury Rejects Zero-Rating VAT on More Products, Citing Benefit to the Rich

  • The South African government is not planning to expand the list of VAT-free products.
  • Deputy Minister of Finance, David Masondo, believes that zero-rating VAT is not the best solution to address the high cost of living.
  • Studies have shown that the benefit of VAT relief on zero-rated items does not reach consumers as intended.
  • Higher income households benefit more from zero-rating than lower income or poor households.
  • VAT constitutes 26% of gross tax revenue in South Africa and is redistributed to the poor through government programs.
  • Further zero-rating would lead to a decline in revenue that could be used to support the poor.
  • The government believes that targeted cash transfers to the poor are more effective than VAT relief.
  • The government has implemented policies to directly benefit lower-income households, such as education and health budgets, social grants, and the Social Relief of Distress grant.
  • Other targeted interventions to assist cash-strapped South Africans include the temporary reduction in the general fuel levy, no increase in the general fuel levy in the past two budgets, the Road Accident Fund levy for food manufacturers, and implementing reforms in the economy to reduce energy and transportation costs.
  • The government is actively finding solutions to combat high prices without relying on further zero-rating.


Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.


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