SA looks set to charge a punitive 14% value-added tax (VAT) on whole-wheat brown bread when the Taxation Laws Amendment Bill 2017 comes into effect.

South Africa, which presently is battling a tax revenue shortfall of a whopping R50.8billion, looks set to charge a punitive 14% value-added tax (VAT) on whole-wheat brown bread when the Taxation Laws Amendment Bill 2017 comes into effect next year.

Certain categories of brown bread, a rich source of carbohydrates for many, which includes whole-wheat brown bread, high fibre brown bread, high protein brown bread and brown health bread, currently qualify as zero-rated items.

This means that consumers are not charged VAT, which was introduced 26 years ago and replaced GST (general sales tax). When the punitive tax was introduced in 1991, brown bread was exempted from it, but that could soon be a thing of the past when the bill is promulgated in 2018.

It reportedly proposed a correction to the VAT6 Act to define brown bread in terms of the updated bread regulations published earlier this year, which amend the definition of brown bread and includes various subclasses of brown bread under the class “brown wheat bread”. Agricultural business chamber chief executive Dr John Purchase said: “The move from zero rated VAT whole wheat brown bread (not brown bread as such) to 14percent standard VAT rating was expected.

"(It) will have only a marginal effect on the industry as whole wheat brown bread only makes up roughly 1.5percent of total bread sales.”

Health product

He said whole wheat brown bread was today a niche health product and not a mainstream consumer product.

“So it will impact on that segment of the consumer profile that regularly purchase whole wheat brown bread, and they will thus be paying approximately 14percent more for their product of preference,” said Purchase.

Food and Allied Workers’ Union general secretary Katishi Masemola said they had campaigned 10 years ago for brown bread to be exempted from VAT. “We think the government wants to equalise the taxation basket of wheat products, but we don’t think bread should be taxed in general.”

Masemola said the effects of the legislation would certainly be more on the consumers than the workers.

“Even if the price of bread were to rise, people still have to consume bread, so in that sense, employment levels are likely to remain the same, but consumers will have to fork out more money to buy bread."

- BUSINESS REPORT