Deputy Finance Minister David Masondo says expanding the basket of zero-rated foods will result in lower tax revenue and mean there are less funds for more targeted relief for the poor.

A Business Day report says the Deputy Minister was speaking during a DA-motivated debate in a mini-plenary of the National Assembly on Thursday on ‘desperately needed relief measures’, including expanding the VAT zero-rated food basket.

The government has been urged to take the step immediately to alleviate the cost-of-living crisis.

Masondo rejected an expansion of the food basket, echoing the view expressed in October by Finance Minister Enoch Godongwana that this would benefit high-income earners more than the poor.

The Minister insisted that the Treasury will not change its position in this regard. 

Masondo said the government does not think expanding the basket of zero-rated food is the right solution to address the high cost of living.

Targeted cash transfers to the poor and targeted expenditure interventions are better and more redistributive than zero-rating food items, which mostly benefits high-income households.

‘Further zero-rating will lead to a decline in revenue which could be used to support the poor,’ Masondo said, noting that the tax revenue lost through zero-rated food items mainly benefits middle- and high-income households, which purchase more of these products.

Full Business Day report