'No more zero-rating of goods'

Cape Town - Finance Minister Trevor Manuel made it abundantly clear on Tuesday that he has no intention whatever of tinkering with the value-added tax system - despite pressure from the left to zero-rate more foodstuffs and other items important to the household economics of the poor.

In his medium term budget policy statement he said that higher income households also benefited from VAT concessions. "Evidence suggests that existing VAT zero-ratings and exemptions, in almost all cases confer substantially more benefits on middle and higher income groups than on lower income groups," he said.

"In addition, depending on market structure, producers and suppliers may capture a large percentage of the benefit of VAT zero-rating."

Manuel insists that these facts reinforce the case against further VAT zero-rating of goods, where the government can give more relief to the poor, and more directly target such relief - no doubt through increases in the social grant, and broadening its base.

The statement also points out that corporate taxes are much less predictable than VAT as a revenue source, because of commodity price and exchange rate fluctuations.

- I-Net Bridge