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Cabinet to discuss VAT, fuel hike report

| Economic factors

The economic cluster ministers tasked with considering a package of measures to alleviate the Value Added Tax (VAT) increase and fuel hikes on consumers have submitted their initial report to President Cyril Ramaphosa.

The recommendations will be discussed at the upcoming mid-year cabinet lekgotla scheduled for Wednesday to Friday, according to Presidency spokesperson Khusela Diko.

At the same time, the independent panel tasked with reviewing and evaluating the impact of zero-rated items is expected to hand over its report on Tuesday.

The panel, chaired by Stellenbosch University’s Professor Ingrid Woolard, was appointed in March just ahead of the VAT rate increase from 14% to 15% on April 1. 

The nine-member panel was tasked with considering the current list of nineteen zero-rated VAT items, which includes brown bread, eggs, milk, fruit, vegetables, maize meal and legumes and recommend effective ways to mitigate the impact of the VAT increase on poor households.

The initial recommendations will be handed over to the Davis Tax Committee and the minister of finance.

Senior Tax Consultant at Mazars, Leonard Willemse, said that the review panel had to walk a “fiscal tightrope” to ensure Treasury’s commitment to fiscal consolidation was not eroded. 

The terms of reference for the panel were broadened in May, allowing members more flexibility to make proposals that could alter the fiscal framework for the 2019/2020 financial year. 

The panel’s report was initially due on June 30 and the deadline was extended to allow for more thorough research.

Fuel hikes protest

The Democratic Alliance and the Organisation Undoing Tax Abuse (OUTA) will march to National Treasury in Pretoria on Tuesday to demand government cut the Road Accident Fund and general fuel levies by R1/l.

Midnight on Tuesday will represent the fifth consecutive month of fuel increases in 2018, albeit a smaller 1c/l hike on both grades of petrol, due to weaker international Brent crude oil costs.

The price of diesel will fall by 4c/l at midnight.

In a statement earlier in July, the economic cluster ministers warned against demands for a reduction in fuel levies, saying taxes on petrol are one of the most efficient instruments to raise revenue for governments worldwide.

The minister also called on retailers and food producers to be mindful of the poor before increasing their prices.

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