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Poverty Issues for Zero Rating VAT in South Africa

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  • Alderman, Harold
  • del Ninno, Carlo

Abstract

Governments often include equity considerations when determining rates for value added taxes (VAT). This paper explores the implication of current and proposed tax exemptions in South Africa from the perspective of their impact on the expenditures of the poor and on the calorie and protein consumption of low-income households. Maize, which is currently exempted from VAT, is shown to be the best choice for low tax rates from both the standpoints of equity and the impact on the food consumption of the poor. In contrast, lower tax rates on fluid milk, which is currently exempted from VAT, and meat, for which an exemption has been proposed, are not good vehicles for assisting the poor. The paper illustrates the revenue foregone with zero tax rates on these commodities and compares the tax relief for the poor and change in nutrients consumed from alternative tax exemptions. Copyright 1999 by Oxford University Press.

Suggested Citation

  • Alderman, Harold & del Ninno, Carlo, 1999. "Poverty Issues for Zero Rating VAT in South Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 8(2), pages 182-208, July.
    • Handle: RePEc:oup:jafrec:v:8:y:1999:i:2:p:182-208
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    Cited by:

    1. World Bank, 2008. "Regional Trade in Food Staples : Prospects for Stimulating Agricultural Growth and Moderation Food Security Crises in Eastern and Southern Africa," World Bank Publications - Reports 7829, The World Bank Group.
    2. Ada Jansen & Elizabeth Stoltz & Derek Yu, 2012. "Improving the targeting of zero-rated basic foodstuffs under value added tax (VAT) in South Africa - An exploratory analysis," Working Papers 07/2012, Stellenbosch University, Department of Economics.
    3. Raghbendra Jha, 2004. "Macroeconomic stabilization and pro-poor budgetary policy in the globalized economy," CAMA Working Papers 2004-08, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    4. Dorosh, Paul A. & Dradri, Simon & Haggblade, Steven, 2009. "Regional trade, government policy and food security: Recent evidence from Zambia," Food Policy, Elsevier, vol. 34(4), pages 350-366, August.
    5. Ms. Sònia Muñoz & Stanley Sang-Wook Cho, 2003. "Social Impact of a Tax Reform: The Case of Ethiopia," IMF Working Papers 2003/232, International Monetary Fund.
    6. Woldu, Thomas & Abebe, Girum & Lamoot, Indra & Minten, Bart, 2013. "Urban food retail in Africa: The case of Addis Ababa, Ethiopia," ESSP working papers 50, International Food Policy Research Institute (IFPRI).
    7. Haggblade, Steven & Nielson, Hunter & Govereh, Jones & Dorosh, Paul A., 2008. "Potential Consequences of Intra-Regional Trade in Short-Term Food Security Crises in Southeastern Africa," Food Security Collaborative Working Papers 55376, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    8. John Cockburn & Hélène Maisonnave & Véronique Robichaud & Luca Tiberti, 2016. "Fiscal Space and Public Spending on Children in Burkina Faso1 [Burkina Faso. Classification-JEL: I32, D58, C50, O55]," International Journal of Microsimulation, International Microsimulation Association, vol. 9(1), pages 5-23.
    9. John Cockburn & Hélène Maisonnave & Véronique Robichaud & Luca Tiberti, 2013. "Fiscal Space and Public Spending on Children in Burkina Faso," Cahiers de recherche 1308, CIRPEE.
    10. Alderman, Harold & Lindert, Kathy, 1998. "The Potential and Limitations of Self-Targeted Food Subsidies," The World Bank Research Observer, World Bank, vol. 13(2), pages 213-229, August.
    11. Dorosh, Paul A. & Dradri, Simon & Haggblade, Steven, 2007. "Alternative Instruments for Ensuring Food Security and Price Stability in Zambia," Food Security Collaborative Working Papers 54488, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    12. Asiya Maskaeva & Joel Mmasa & Nicodemas Lema & Mgeni Msafiri, 2019. "The Impact of Fiscal Policy on Income Distribution in Tanzania: A Computable General Equilibrium Analysis," Working Papers MPIA 2019-07, PEP-MPIA.
    13. Margaret Grosh & Carlo del Ninno & Emil Tesliuc & Azedine Ouerghi, 2008. "For Protection and Promotion : The Design and Implementation of Effective Safety Nets," World Bank Publications - Books, The World Bank Group, number 6582.

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