Independent panel to consider expanding VAT-free items

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JOHANNESBURG - Treasury has asked the chair of the Davis Tax Committee, Judge Dennis Davis, to establish an independent panel to review the current list of zero-rate Value-Added Tax (VAT) items

On April 1, VAT will increase from 14 percent to 15 percent. 

Currently, there are 19 items that are VAT free, but in order to make sure the one percent increase is not regressive, the Minister of Finance, Nhlanhla Nene, wants to look at expanding the basket. 

The 19 items include brown bread, dried mealies, tinned pilchards, fresh fruit and vegetables, vegetable oil, milk and eggs.

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Nene said the independent panel will "consider the most effective way to mitigate the impact of the increase in the VAT rate on poor and low-income households. The review will consider expanding the list of basic food items that are VAT zero-rated, and also consider how specific expenditure programmes can be improved to better target poor and low-income households (e.g. National School Nutrition Programme, food stamps etc.)", the Treasury said in a statement. 

The minister and Judge Davis have agreed that Professor Ingrid Woolard will head the panel, along with "prominent experts". 

Woolard is currently the dean of the University of Cape Town&39;s School of Economics. She is also a Research Associate of the Southern Africa Labour and Development Research Unit (SALDRU) and a Research Fellow of the Institute for the Study of Labour (IZA). 

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The full list of names on the panel will be made public in the next two weeks. 

"The panel will take public comments and convene hearings, and will engage with different stakeholders from civil society organisations, organised labour and business, and all interested parties," Treasury said.

The panel is set to deliver an initial report with recommendations to the David Tax Committee and Treasury by June 20, in time for Cabinet to consider it for draft legislation in July.