The VAT hike on food prices and calls for food price regulation.
On the 1st of April 2018, despite massive resistance, government went ahead and increased the VAT rate to 15%. We have argued in the past that increasing the VAT rate on food was unwise. This media statement using our April 2018 data looks at the month-on-month impact of the VAT hike for households living on low incomes. It is a snap shot as the effect of the VAT hike will take time to run through the value chains however already it signals some worrying trends. Foods subject to VAT make up 54% of the total cost of the PACSA Food Basket. The statement finds that the increase in VAT by 1% resulted in a 6.5% increase in the total VAT levied on the foods subject to VAT on the PACSA Food Basket, moving the total VAT payable to R221.59. The PACSA Food Basket has now reached its highest level of R3 144.02. It has increased by 9% over the past eight months. Hiking the VAT rate has made the affordability crisis deeper and will have a considerable negative impact on households living on low incomes, who are already in a very severe crisis. We call for food to be made a public good; to remove all VAT from food; to increase wages to those of a living wage and to regulate food prices.