Parliament’s standing committee on finance has recommended that the basket of foods on which no VAT is paid be expanded to provide relief for households in distress.
The recommendation forms part of the committee’s report adopted on Tuesday on the revised fiscal framework and revenue proposals. The report was compiled after public hearings on the medium-term budget policy statement tabled in parliament earlier in November, and a response by the Treasury to the submissions.
In the past, the Treasury has rejected expanding the basket of zero-rated goods.
This position was reiterated in October by finance minister Enoch Godongwana in a written reply to a parliamentary question by DA finance spokesperson Dion George, who has insisted that this measure is necessary to assist the poor, who are struggling with a cost-of-living crisis.
At present, food items that do not attract VAT include brown bread, maize meal, rice, vegetables, milk, vegetable oils and eggs. George wants the basket to include bone-in chicken, beef, tinned beans, wheat flour, margarine, peanut butter, baby food, tea, coffee and soup powder.
In his parliamentary reply, Godongwana referred to an independent panel report in 2018, which found that extending zero-rated food items would be inefficient because it would benefit high-income families more. The goods that are already zero-rated benefit the poor as they consume a relatively high share of those items. The minister insisted the Treasury will not change its position.
In a briefing to parliament’s two finance committees on Friday, the head of the Treasury’s budget office, Edgar Sishi, noted that vulnerable households continue to receive the lion’s share of fiscal support. Over the 2024 medium-term expenditure framework, 61% of consolidated noninterest spending goes towards healthcare, education, social protection, community development and employment.
Social development expenditure amounts to R1.2-trillion over the medium term.
Sishi said significant public resources provide targeted poverty relief, including the extension of the R350-a-month social relief of distress grant to March 2025. He noted that public employment programmes target vulnerable groups to directly address poverty, inequality and unemployment.
George called on Godongwana to act on the committee’s recommendation. He strongly opposed new taxes being imposed to fund an expanded zero-rated basket, which he said could be financed through prudent financial management.
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