Improving the targeting of zero-rated basic foodstuffs under value added tax (VAT) in South Africa - An exploratory analysis

Ada Jansen (), Elizabeth Stoltz () and Derek Yu
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Ada Jansen: Department of Economics, University of Stellenbosch
Elizabeth Stoltz: Department of Economics, University of the Western Cape

No 07/2012, Working Papers from Stellenbosch University, Department of Economics

Abstract: VAT without any exemptions or zero-rating is regressive. Since the inception of VAT in South Africa, there has been an ongoing debate around the issue of zero-rating to alleviate the burden on poor households. This paper uses vegetables as an example and conducts tax incidence analyses to compare the relative burden of VAT on vegetables for various income groups. It finds that differential treatment of the zero-rating of VAT on various categories of vegetables could be beneficial in terms of relative equity gains. It is suggested frozen vegetables remains zero-rated, whereas canned vegetables and some fresh vegetables items be zero-rated.

Keywords: Value added tax; expenditure patterns; regressivity; zero-rating; equity gain; optimal targeting; basic foodstuffs; sub-categories of vegetables; South Africa (search for similar items in EconPapers)
JEL-codes: H2 H24 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-acc and nep-afr
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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