Consumer Goods Council says Treasury's U-turn on expanding zero-rated food basket 'perplexing'
Treasury argued that retailers don’t necessarily lower their prices significantly on zero-rated items, and in the end, benefit more than the consumer.
FILE: Customers shopping at Shoprite. Image: Abigail Javier/EWN
CAPE TOWN - The Consumer Goods Council says it is perplexing that Treasury is backtracking on a commitment to expand the zero-rated food basket because it was no longer introducing a value-added tax (VAT) hike.
Treasury has argued that retailers don’t necessarily lower their prices significantly on zero-rated items, and in the end, benefit more than the consumer.
In public submissions on the national budget to Parliament's finance committees on Friday, the Consumer Goods Council's legal head, Neo Momodu, said that by zero-rating additional items, the loss to the fiscus would be minute.
In the first and second versions of the budget, Treasury had pledged to add a host of additional items to the tax-free basket, including chicken, offal, dairy liquid blends and tinned vegetables.
"To say zero-rating is used as a blunt instrument, it really is perplexing, because the very items that were proposed to be zero-rated were actually chosen by National Treasury. And I'm hoping those were chosen because some kind of research informed why those items, and the logical conclusion would be because evidence shows that it's the poor who actually consume and buy those products."
The council, along with the South African Poultry Association and dairy company, Clover SA, have appealed to Parliament to rethink the U-turn on zero-rating on humanitarian grounds.
"The status quo, if it persists, and scrapping the zero-rating, does not really guarantee that poor households can afford this. There’s evidence right now of malnutrition, people going hungry and food insecurity," said Momodu.