HILARY JOFFE | Zero-rating foods: tough choices and compromised benefits
There was the vexed issue of sanitary pads and tampons, which are clearly a merit good
When the Davis tax committee published its final report on VAT earlier this year, it strongly recommended that the government not add to the list of food items that are zero-rated, a list that already includes 19 staples, from mealie meal and milk to pilchards and potatoes. The committee's logic was that the existing zero ratings were well targeted to poor households and that the monetary benefit of any further zero ratings would go mainly to richer households; a better pro-poor strategy would be simply for the government to give the money directly to poor households by way of higher social grants or food vouchers, or a better school nutrition scheme. Now, the panel of experts which the finance minister appointed in April to look at mitigating the impact of the February budget's one-percentage-point increase in VAT has recommended that several more products be zero-rated. Zero-rating these would cost the public purse about R4bn in lost revenue each year - on top of the estimated R26...
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