VAT to be added to most brown breads

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Analysts are predicting a spike of at least 10 percent in the bread price after the import duty on wheat was raised last week. Bread is one of South Africa's basic foodstuffs.

JOHANNESBURG - Value added tax (VAT) is likely to be charged on certain types of brown bread, including whole wheat, high fibre, high protein and brown health bread variants.

Consumers, who have been exempt from paying tax on bread since 1991, could soon be charged VAT for buying one type of loaf of bread and no tax for another.

"What has now happened is that the brown bread (exemption) is limited. So, your previous categories of whole wheat bread, speciality breads, all of those breads now fall away and you only now have brown bread, which is going to be subject to the zero rating,” PwC partner Lesley O&39;Connell Xego said.

“What that means is that your whole wheat bread, which is your easy example, is now going to be 14% more expensive."

If you were paying R12.50 for your choice of whole wheat bread, you could end up paying as much as R14.25 a loaf.

According to the updated regulations published earlier in 2017, brown bread is categorised into sub-classes.

Bread that contains 0 percent brown wheat flour, such as whole wheat, high fibre and high protein brown health breads will be taxed.

Brown bread prepared from a mixture of white flour and whole wheat flour won&39;t be charged VAT. 

Although consumers will be forced to pay more, O&39;Connell Xego believes this new law still protects the majority, who are poor.

“They probably looked at who buys this bread and if it is the more affluent that will be buying the healthier, whole wheat bread, then the more affluent have got to bear that additional cost.

“It’s just unfortunate that at the end of the day the healthier choice is becoming now the more expensive choice,” O&39;Connell Xego said.

The proposed changes are set to come into effect once the bill is signed into law.

O&39;Connell Xego says the new regulations could hurt suppliers if they raise prices, as cash-strapped consumers turn to zero-rated white and brown bread.

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