Mitigating the impact of the VAT increase: can zero-­‐rating help?

This report evaluates the 2018 VAT increase in South Africa from 14% to 15%, arguing that it disproportionately affects poor and low-income households and makes the tax mix more regressive. The analysis finds that current zero-rating is well-targeted and proposes expanding the list of zero-rated items to 23 additional categories to support vulnerable groups, including female-headed households. To offset the resulting revenue loss, the report suggests implementing a 25% luxury VAT rate on specific high-end goods, which could generate up to R9.6bn in additional revenue.

• In April 2018, South Africa increased its Value Added Tax (VAT) rate by one percentage point, rising from 14% to 15%. This was the first such increase since April 1993, when the rate moved from 10% to 14%.
• The VAT increase is described as making the South African tax mix more regressive, as it increases the proportion of tax paid by poor and low-income households. This effect is further compounded by a 52 cents increase in the fuel levy, which raised costs for petrol (3.9% in real terms) and diesel (4.4% in real terms).
• The report concludes that existing zero-rating is generally well-targeted, with the financial benefits of not paying VAT accruing disproportionately to poor and low-income households. In cases where statistical distribution does not show this, the report argues the exemptions are often justified by socio-economic rights or health considerations.

APA

Njozela, L., & Isaacs, G. (2018). Mitigating the impact of the VAT increase: can zero-­‐rating help? Institute for Economic Justice. https://iej.org.za/wp-content/uploads/2019/05/Mitigating-the-impact-of-VAT-increase-by-extending-zero-rating-IEJ-report-09-08-18.pdf

Chicago

Njozela, Lindokuhle, and Gilad Isaacs. Mitigating the impact of the VAT increase: can zero-­‐rating help? Institute for Economic Justice, 2018. https://iej.org.za/wp-content/uploads/2019/05/Mitigating-the-impact-of-VAT-increase-by-extending-zero-rating-IEJ-report-09-08-18.pdf.

Wikipedia

{{cite report |last1=Njozela |first1=Lindokuhle |last2=Isaacs |first2=Gilad |title=Mitigating the impact of the VAT increase: can zero-­‐rating help? |publisher=Institute for Economic Justice |date=August 2018 |url=https://iej.org.za/wp-content/uploads/2019/05/Mitigating-the-impact-of-VAT-increase-by-extending-zero-rating-IEJ-report-09-08-18.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{njozela2018mitigating, author = {Njozela, Lindokuhle and Isaacs, Gilad}, title = {{Mitigating the impact of the VAT increase: can zero-­‐rating help?}}, institution = {Institute for Economic Justice}, year = {2018}, month = aug, url = {https://iej.org.za/wp-content/uploads/2019/05/Mitigating-the-impact-of-VAT-increase-by-extending-zero-rating-IEJ-report-09-08-18.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }