Vavi says list of VAT-free items will do ‘nothing’ for the poor

The South African Federation of Trade Unions has called for more items to be added to the latest list of recommended zero-rated foods because the new list is not complete and does not address the needs of the poor.

However, Saftu supported the recommendation by the panel appointed by National Treasury, which added white bread, cake flour, sanitary pads, school uniforms and nappies to the basket of zero-rated items.

Finance Minister Nhlanhla Nene asked the panel to review the 19 food items currently zero-rated for value-added tax.

“The federation welcomes any move, however small, to improve the lives of South Africa’s poorest families, but this change will do virtually nothing to change the crisis facing South Africa’s poor majority and to rescue them from grinding poverty and the struggle to survive from day to day,” Saftu general secretary Zwelinzima Vavi said in a statement yesterday.

But the federation, quoting a report by the Institute for Economic Justice, which identified 23 categories of goods and service that could be zero-rated to benefit the poor, said more needed to be done.

Among the 23 categories on the IEJ list were items that Saftu said disproportionately benefited the poor and low-income households, women and children.

It said the addition of these items also advanced the constitutional rights of inequality, health, access to education and dignity of  the people, but many were excluded from the panel’s recommendation.

READ MORE: ACDP commends recommendation of VAT-free sanitary items

The IEJ list contained were cake and bread flour; sorghum meal and mabella; poultry (including heads and feet); mopane worms; other canned fish; creamer whiteners; amageu; baby food; powder soup; instant yeast; soya product (excluding soy milk); tea; infants and children’s clothing and footwear (include school uniforms); candles and matches; coal and other household fuel; hotplates; soap and medicine.

It also mentioned medical services in public institutions and further called for the inclusion of cellphone airtime; textbooks and stationery; disposable nappies; sanitary towels and tampons; and agricultural production.

“Saftu condemns the fact that this list of 23 was reduced to just eight and demands that these be added back. It will certainly not retrospectively justify the decision announced in the budget in February to raise VAT from 14% to 15% from April 1, 2018, which Saftu condemned then as an assault on the living standards of the poor, and which we continue to demand be reversed,” Vavi said.

He said the VAT was an inherently regressive and unfair tax, as it was paid at the same rate by the rich and the poor, millions of whom earn too little to pay income tax. The new zero-rating would also benefit the rich more than the poor.

Quoting the IEJ report, Vavi said: “In rand terms the rich almost always benefit more from zero-rating than the poor, because they account for a much larger share of total spending.

“Even when the poor spend a larger share of their income on a good, zero-rating it usually means high-income households get more tax relief in money terms for goods that were not zero-rated, the poorest decile spent R3 billion, while the richest spent R87 billion.”

According to Vavi, this meant the wealth gap in the one of the world’s most unequal societies will widen even further. “There can be no justification for taxing the poor at all in a country where about two-thirds of South Africa’s wealth is held by the top 1% and about 90% by the top 10%,” he said.

“We shall only see inequality widening even further, and poverty spreading and deepening for as long as the ANC government is ruled by the dictates of credit-ratings agencies who demand austerity budgets, public sector spending and job cuts,” Vavi added.

Recently Saftu president Mac Chavalala condemned the country’s inequality. “As the working class, we have been on a junk status for far too long. Our warning to all those who seek to keep the status quo is simple – the holiday is over! From now going forward, we will engage you in the streets and the boardrooms,” Chavalala said.

– ericn@citizen.co.za

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