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VALUE ADDED TAX SOUTH AFRICA: 1991 - 2011
STANDING COMMITTEE ON FINANCE
Presenter: Cecil Morden | Chief Director, Tax Policy, National Treasury | 23 March 2011
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Contents
1. Introduction
2. History of VAT in South Africa
3. VAT revenue performance
4. Concessions and exclusions
5. Requests for VAT concessions
6. Exemptions and apportionment problems
7. Tax burden / regressivity
8. Multiple VAT rates
9. VAT in South Africa, Cnossen(Katz Commission)
11. Taxing consumption, WB, Prof. Richard Bird
12. Consumption taxes, OCED
13. Mirrlees Review, – UK
14. IES, Stats SA 2005/06
15. Concluding remarks
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Introduction (1)
• Following the Margo Commission (1986) Government released a WhitePaper in 1988 indicating its intention to replace the then one-stageGeneral Sales Tax (GST) with a Value-Added Tax system (VAT).
• Concerns raised with respect to GST - evasion, the extent of the erosionof the sales tax base due to general exemption of food items and theexclusion of most services.
• Businesses could partially escaped cascading effect of GST by means ofGST credit certificates - certificates were abused leading to concernsabout tax evasion. Registration certificates used to buy goods GST freeif bought for resale or used as intermediate inputs for further processing.
• However, capital goods and other intermediary inputs (e.g. advertising)formed part of the GST base.
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Introduction (2)
• Value Added Tax was introduced on 30 September 1991.
• It is a destination VAT, invoice credit method, with full credits
for capital goods.
• VAT is payable when invoice is issued – payment basis for
municipalities and sole traders with an annual turnover
below R2.5 million per annum
• Value-Added Tax Committee (VATCOM) recommended a
broad tax base with minimal exclusions
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History of sales tax rates in South Africa
• General Sales Tax (GST)
– 3 July 1978: 4%
– 1 March 1982: 5%
– 1 September 1982: 6%
– 1 February 1984: 7%
– 1 July 1984: 10%
– 25 March 1985: 12%
• Value Added Tax
– 30 September 1991: 10%
– 7 April 1993: 14%
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VAT history (1)
• When the VAT Act, No 89 of 1991, was promulgated on 12
June 1991 no provisions were made to exclude (zero-rate)
any goods or services.
• On 17 July 1991 the zero-rating of brown bread and maize
meal were included.
• On 29 September 1991 (the Sunday before the scheduled
introduction of VAT on Monday 30 September 1991),
following extended public protest, eight additional basic food
items were added to the zero-rated list.
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VAT history (2)
• At the beginning of 1993 further public protest resulted in the zero rating of an additional nine basic food items with effect from 7 April 1993.
• The VAT rate was increased from 10 per cent to 14 per cent on the same day.
• Pressures for a higher VAT rate on luxury goods were allayed, to an extent, by the extension of ad valorem excise duties on luxury goods to items such as air conditioners, cell phones, video cameras, jetskis and domestic dishwashers. Motor vehicles were later added to the list by way of a progressive ad valorem duty formula that excluded the cheapest vehicles from this impost.
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Revenue performance
• VAT is the second most important source of revenue for the South African fiscus, after PIT, and that the South African VAT system appears to be, after New Zealand, one of the better performing VAT systems.
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PIT, CIT & VAT as % of Total Tax Revenue
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% of Total Tax Revenue
Individuals GST / VAT Companies
1983/84 28.9% 19.7% 25.9%
1984/85 31.5% 23.8% 23.0%
1985/86 29.0% 26.1% 25.2%
1989/90 30.5% 25.6% 21.1%
1990/91 33.5% 25.3% 20.5%
1991/92 38.4% 24.1% 18.0%
1992/93 40.8% 21.1% 15.8%
1993/94 39.1% 26.3% 11.9%
1994/95 40.0% 26.1% 12.1%
1995/96 40.6% 26.0% 12.4%
1996/97 40.6% 24.5% 12.9%
1999/00 43.3% 24.4% 10.6%
2000/01 40.1% 25.3% 13.7%
2001/02 36.4% 24.6% 17.1%
2002/03 34.0% 25.3% 20.1%
2003/04 32.9% 26.9% 20.3%
2004/05 31.9% 28.2% 20.3%
2005/06 30.5% 27.8% 20.9%
2006/07 29.2% 27.9% 24.7%
2007/08 30.1% 26.9% 25.0%
2008/09 32.0% 25.4% 27.2%
2009/10 35.4% 25.4% 23.3%
TAX/GDP ratios
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Tax Revenue as a % of GDP
Individuals GST / VAT Companies Total Tax / GDP Budget Rev / GDP
1983/84 5.9% 4.0% 5.3% 19.5% 20.3%
1984/85 6.8% 5.2% 5.0% 21.0% 21.8%
1985/86 6.9% 6.2% 6.0% 23.1% 23.7%
1989/90 7.6% 6.4% 5.3% 24.7% 25.0%
1990/91 8.1% 6.1% 4.9% 24.0% 24.1%
1991/92 8.7% 5.5% 4.1% 22.9% 22.7%
1992/93 8.9% 4.6% 3.4% 21.9% 21.8%
1993/94 8.5% 5.7% 2.6% 21.9% 21.8%
1994/95 9.0% 5.9% 2.7% 22.8% 22.6%
1995/96 9.1% 5.8% 2.8% 22.5% 22.4%
1996/97 9.4% 5.6% 3.0% 23.1% 23.0%
1999/00 10.3% 5.8% 2.5% 24.0% 23.7%
2000/01 9.1% 5.7% 3.1% 23.1% 22.6%
2001/02 8.6% 5.8% 4.0% 24.0% 23.7%
2002/03 7.9% 5.9% 4.7% 23.5% 23.2%
2003/04 7.6% 6.3% 4.7% 23.5% 23.2%
2004/05 7.8% 6.9% 5.0% 24.9% 24.4%
2005/06 7.9% 7.2% 5.4% 26.3% 26.0%
2006/07 7.7% 7.3% 6.5% 27.0% 26.2%
2007/08 8.1% 7.2% 6.7% 27.5% 26.9%
2008/09 8.4% 6.7% 7.1% 26.9% 26.2%
2009/10 8.4% 6.0% 5.5% 24.3% 23.6%
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TAX/GDP ratios
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0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
%
YEAR
TAX / GDP ratio: Three main taxes
Individuals
VAT
Companies
VAT revenue trend
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3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
15.0%
16.0%
17.0%
18.0%
19.0%
20.0%
21.0%
22.0%
23.0%
24.0%
25.0%
26.0%
27.0%
28.0%
29.0%
%
YEAR
VAT Revenue: % of Tax Revenue (lhs) and of GDP (rhs)
% of Tax Revenue
% of GDP
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Household consumption & VAT as a % of
GDP
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0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
58.0%
59.0%
60.0%
61.0%
62.0%
63.0%
64.0%
65.0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
FHCE/GDP
VAT/GDP
VAT performance
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0.30
0.32
0.34
0.36
0.38
0.40
0.42
0.44
0.46
0.48
0.50
0.52
0.54
RA
TIO
YEAR
GST / VAT: "Efficiency" = ( VAT Revenue /GDP ) / VAT Rate
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VAT Revenue
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VAT in South Africa
% of Tax Revenue % of GDP "Efficiency" "Rate"
1989/90 25.6% 6.4% 0.49 13.0%
1990/91 25.3% 6.1% 0.47 13.0%
1991/92 24.1% 5.5% 0.47 11.5%
1992/93 21.1% 4.6% 0.38 12.0%
1993/94 26.3% 5.7% 0.41 14.0%
1994/95 26.1% 5.9% 0.42 14.0%
1995/96 26.0% 5.8% 0.42 14.0%
1996/97 24.5% 5.6% 0.40 14.0%
1999/00 24.4% 5.8% 0.41 14.0%
2000/01 25.3% 5.7% 0.41 14.0%
2001/02 24.6% 5.8% 0.42 14.0%
2002/03 25.3% 5.9% 0.42 14.0%
2003/04 26.9% 6.3% 0.45 14.0%
2004/05 28.2% 6.9% 0.49 14.0%
2005/06 27.8% 7.2% 0.52 14.0%
2006/07 27.9% 7.3% 0.52 14.0%
2007/08 26.9% 7.2% 0.52 14.0%
2008/09 25.4% 6.7% 0.48 14.0%
2009/10 25.4% 6.0% 0.43 14.0%
VAT = 30 September 1991: Fiscal Year 1 April to 31 March
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OECD: 2001
VAT / GDP
%
Standard
Rate %
"Efficiency
"
Australia 3.70 10.0 37.0%
Austria 8.38 20.0 41.9%
Canada 3.10 7.0 44.3%
Denmark 9.69 25.0 38.8%
Finland 8.17 22.0 37.1%
Germany 6.70 16.0 41.9%
Greece 7.40 18.0 41.1%
Hungary 8.40 25.0 33.6%
Ireland 6.85 21.0 32.6%
Japan 2.40 5.0 48.0%
Korea 4.74 10.0 47.4%
Netherlands 7.44 17.5 42.5%
New Zealand 8.63 12.5 69.0%
Poland 7.30 22.0 33.2%
Slovak Republic 7.77 23.0 33.8%
Spain 5.30 16.0 33.1%
Sweden 9.20 25.0 36.8%
Switzerland 4.10 7.5 54.7%
Turkey 6.86 16.0 42.9%
United Kingdom 6.10 17.5 34.9%
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VAT concessions
• As a consumption destination based tax exports are zero-rated and imports are subject to VAT
• Most countries exclude non-fee based financial services from the VAT base due to practical difficulties
• Many analysts have demonstrated that in absolute monetary
terms the middle and higher income earners benefit more from
the zero-rating than the poor. However, public opinion is very
strongly in favour of maintaining the zero rating of basic
foodstuffs.
• An effective VAT system, not unduly compromised by well-
intended but doubtful concessions, is essential in generating the
necessary tax revenues to fund Government's expenditure
programmes, including initiatives to help the poor.
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Zero-rated and exempt supplies
The following goods and services are zero-rated:
• Exports
• 19 basic food items
• Illuminating paraffin
• Goods which are subject to the fuel levy (petrol and diesel)
• International transport services
• Farming inputs
• Sales of going concerns, and
• Certain grants by government.
Goods and services exempted from VAT are:
• Non-fee related financial services
• Educational services provided by an approved educational institution
• Residential rental accommodation, and
• Public road and rail transport.
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Basic foodstuffs zero-rated in South Africa
• Brown bread.
• Maize meal.
• Samp.
• Mealie rice.
• Dried mealies.
• Dried beans.
• Lentils.
• Pilchards/sardinella in tins.
• Milk powder.
• Dairy powder blend.
• Rice.
• Vegetables.
• Fruit.
• Vegetable oil.
• Milk.
• Cultured milk.
• Brown wheaten meal.
• Eggs.
• Edible legumes and pulses of
leguminous plants.
Request for VAT concessions
During the last few years, especially since the zero-rating of illuminating
paraffin in 2001, the Minister of Finance has received several requests
from the public, certain interest groups and by way of questions in
Parliament to abolish VAT on the following goods and services:
– medicines;
– medical services;
– books;
– electricity;
– water;
– red meat;
– mageu (a maize based soft drink, largely consumed by the poor);
– security related expenses by private individuals;
– canned vegetables; and
– 450 gram household candles. The South African Candle Manufacturers argued that the
zero-rating of illuminating paraffin has impacted negatively on the sales of household
candles.
– And most recently toll fees
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Exemptions and apportionment problems
• It has been argued that exemption is also an elegant way of relieving certain businesses from the administrative burden of complying with the VAT system (e.g. public transport, taxis).
• In this regard, the threshold below which certain businesses do not have to register for VAT is also an indirect form of exemption.
• However, whilst VAT exemption might result in administrative relief for businesses that make only exempt supplies, it actually results in major administrative complexities for those businesses that make both exempt supplies and taxable supplies (standard- and /or zero rated).
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Tax and regressivity (1)
• The debate on the effectiveness of attempts to help the needy via the zero rating persists. Many analysts have demonstrated that in absolute monetary terms the middle and higher income earners benefit more from the zero-rating than the poor.
• The zero-rating of illuminating paraffin (IP) in South Africa is probably a case in point of well intended but misguided zero-rating.
• It would appear that most of the benefits of the VAT zero-rating of IP was captured by retailers in the form of higher profit margins.
• Providing relief in the form of reduced rates, zero-rating (or exemption) for “merit” goods might even worsen the regressivity of a VAT system because these goods (books, medical services, etc) are mostly bought (in the private sector) by individuals in the middle and higher income groups.
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VAT and regressivity (2)
• "In the final analysis…it is not whether the VAT itself is regressive or
not, but whether the entire tax and expenditure system is achieving the
pattern of household income net of taxes and gross of transfers and
government expenditures that society desires. The case for VAT does
not fall on its regressiveness. The case for VAT is that it is an efficient
way of collecting a large and buoyant revenue for government; other
parts of the budget should take care of progressiveness, and the VAT
should be kept as simple and efficient as it is intended to be - for that is
its justification" (Tait: 1988).
• "The justification for VAT is that it is a neutral, efficient, buoyant,
revenue-raising instrument. It is not designed to correct income or
wealth inequalities. Other aspects of the tax system, such as the
progressive income tax and more specifically the expenditure side of
the government budget should take care of progressiveness, thus
leaving the VAT system as simple and effective as possible" (Adams:
1994).
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Multiple VAT rates
• Most VAT multiple rates are as a result of political concessions rather
than sound socio-economic and tax administrative considerations. The
Margo Commission (1987) recommended a single rate VAT structure
and inter alia quoted the Irish Commission in this regard. The Irish
Commission on Taxation concluded in its Third Report of 1984, that an
attempt to make VAT progressive by using a multi-rate system is not
recommended. Instead, it recommended a single-rate broad-based
system on all purchases. The Commission stated:
• "We are satisfied that to charge different rates of indirect tax on
different goods and services is a most wasteful and ineffective way of
trying to redistribute income. That task is best achieved by well-
designed public expenditure programmes, supplemented at the top of
the range of income and wealth by a progressive expenditure (income)
tax. Measures on the indirect tax side complicate the system, give
increased scope for evasion and accomplish little in the way of
redistribution."
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Administration & Compliance costs
• Differential VAT rates (including concessions in the form of zero-
rating, reduced rates and /or exemptions) results in increased
administration and compliances costs.
• There is a (+) correlation between the compliance costs of VAT
and the number VAT rates. (Compliance of VAT in Sweden, Report 2006:3B)
• “Global VAT experience has shown that, regardless of the effort
which goes into defining the scope of a concession, borderline
cases will subsequently result in uncertainties for both the
Revenue Authority, as well as evasion opportunities for
unscrupulous vendors (p.167)”
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VAT in South Africa: What Kind of Rate Structure? Cnossen, VAT
Monitor, 2004 (Katz Commission,1994)
• “providing relief to the poor through exemptions and VAT zero-
rating is likely to be both unsound tax policy and ineffective
social policy”
• “the disadvantages of multiple VAT rates outweigh the possible
redistributive gains available from this option”
• “VAT impact studies in other countries also confirm specific
conclusions of the Katz Commission. In Ireland, for example, it
was found that the poor spend relatively more of their income on
food than the rich, (however) in absolute amounts the rich spend
twice as much (on food) as the poor. Consequently, Ireland’s
zero-rating of food gives twice as much tax relief to high-income
groups than to low-income groups - an odd way of alleviating
the plight of the poor”.
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VAT in South Africa: What Kind of Rate Structure? Cnossen, VAT
Monitor, 2004 (Katz Commission,1994)
• “An important administrative advantage of a VAT is that the
whole production-distribution process is involved in collecting
the tax from the consumer. Basically, zero-rating (other than
for exports, for which it is imperative) nullifies this advantage
and turns it into a disadvantage. It involves the tax office in
an expensive collection and refund process that does not
yield revenue. Refund returns must be monitored with
particular care even though no revenue is realized”.
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Taxing Consumption, World Bank,
PREM notes June 2009. Richard Bird
• “.. The best sales tax (VAT) with respect to both efficiency and administration is undoubtedly one with a single uniform rate applied to all taxable transactions”.
• “.. Higher rates on ‘luxury’ goods are an ineffective means of increasing the progessivity of the fiscal system, and, most importantly, lower tax rates on ‘necessities’ are generally poorly targeted and ineffective”.
• “The rich may spend relatively less of their income on ‘basic food’, but they are likely tp spend absolutely more and hence receive more benefit from such concessions.”
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Consumption Taxes: the Way of the Future? OECD, Policy
Brief, October 2007
• “… many countries apply a reduced rate of VAT to certain “necessities” in order to reduce the tax burden on the poor. However, this is a relatively ineffective way of dealing with the problem as the rich typically consume more of the “necessities” than the poor”.
• “An argument can also be made in the case of using VAT to reduce employers social security contributions, thus reducing the cost of exporting and importing-competing firms”.
• “Germany increased its VAT rate at the beginning of 2007, partly to finance a cut in social security contributions”.
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Mirrlees Review of the UK tax system, Institute for
Fiscal Studies, Nov 2010
• “Value added tax (VAT) is an important and, on the whole, well-designed tax.But in the UK, zero rates are applied to an unusually wide range of goods andservices. There may be convincing arguments to justify a few of thesedepartures from uniformity, but not most. We favour a broadening of the VATbase in the UK, applying the standard rate to a wider range of goods”.
• “The central component of both reform packages we look at is a broadening ofthe VAT base such that goods and services now subject to zero and reducedrates of VAT – principally food, passenger transport, books and other readingmatter, prescriptions drugs, children’s clothing, and domestic fuel and power –would be taxed at the standard rate after the reform”.
• “Why should the tax system favour people who like reading magazines more thanlistening to music, or who buy their children more expensive clothes and lessexpensive toys than other?
• The UK recently increased the standard VAT rate from 17.5% to 20%
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IES, Stats SA, 2005/06
(% expenditure by expenditure group)
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R million Lower 2 3 4 5 6 7 8 9 Upper
Average household size 2,6 3,4 4,0 4,3 4,6 4,8 4,7 4,5 3,9 3,5 3,8
Main expenditure group
Food and non-alcoholic beverages 36.1% 35.7% 34.1% 32.6% 30.8% 28.1% 24.5% 19.6% 13.1% 7.0% 14.4%
Alcoholic beverages and tobacco 3.4% 2.5% 2.0% 2.1% 2.0% 1.9% 2.0% 1.5% 1.3% 0.6% 1.2%
Clothing and footwear 9.4% 9.3% 8.9% 9.3% 8.7% 8.4% 7.9% 7.0% 5.1% 2.9% 5.0%
Housing, water, electricity, gas and other fuels 21.1% 19.4% 18.7% 18.4% 18.7% 18.1% 19.4% 22.5% 27.4% 24.6% 23.6%
Furnishings, household equipment and routine
maintenance of the dwelling 4.9% 5.7% 6.9% 7.3% 7.8% 8.5% 8.9% 8.2% 6.8% 6.3% 6.9%
Health 1.7% 1.7% 1.6% 1.7% 1.5% 1.5% 1.5% 1.8% 1.5% 1.7% 1.7%
Transport 8.2% 8.5% 9.1% 9.9% 9.7% 10.1% 11.0% 12.5% 14.9% 27.6% 19.9%
Communication 2.8% 3.2% 3.5% 3.5% 3.7% 3.7% 3.8% 3.9% 4.1% 3.2% 3.5%
Recreation and culture 1.5% 2.0% 2.6% 2.8% 3.2% 3.8% 4.0% 4.2% 4.3% 5.4% 4.6%
Education 0.9% 1.1% 1.0% 1.3% 1.3% 1.9% 1.9% 2.5% 3.2% 2.5% 2.4%
Restaurants and hotels 3.5% 2.8% 3.2% 2.2% 2.3% 2.7% 2.8% 2.0% 2.1% 2.0% 2.2%
Miscellaneous goods and services 6.3% 7.9% 8.1% 8.6% 10.0% 11.1% 11.9% 14.1% 16.0% 15.9% 14.4%
Other unclassified expenses 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.3% 0.3% 0.3% 0.3% 0.3%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Expenditure deciles Total
%
IES, Stats SA, 2005/06
(% expenditure by expenditure deciles per expenditure group)
32
R million Lower 2 3 4 5 6 7 8 9 Upper
Average household size 2,6 3,4 4,0 4,3 4,6 4,8 4,7 4,5 3,9 3,5 3,8
Main expenditure group
Food and non-alcoholic beverages 2.6% 4.3% 5.6% 6.7% 7.9% 9.2% 10.8% 13.0% 15.6% 24.3% 100%
Alcoholic beverages and tobacco 3.0% 3.8% 4.1% 5.3% 6.5% 7.8% 10.9% 12.2% 19.1% 27.2% 100%
Clothing and footwear 2.0% 3.3% 4.2% 5.6% 6.5% 8.0% 10.1% 13.5% 17.7% 29.2% 100%
Housing, water, electricity, gas and other fuels 0.9% 1.4% 1.9% 2.3% 2.9% 3.6% 5.2% 9.2% 20.1% 52.4% 100%
Furnishings, household equipment and routine
maintenance of the dwelling 0.7% 1.4% 2.3% 3.1% 4.2% 5.9% 8.2% 11.4% 17.0% 45.7% 100%
Health 1.1% 1.7% 2.3% 3.1% 3.4% 4.2% 5.6% 10.4% 15.4% 52.7% 100%
Transport 0.4% 0.7% 1.1% 1.5% 1.8% 2.4% 3.5% 6.0% 12.9% 69.6% 100%
Communication 0.8% 1.6% 2.4% 2.9% 3.9% 5.0% 7.0% 10.6% 20.1% 45.8% 100%
Recreation and culture 0.3% 0.8% 1.3% 1.8% 2.6% 3.9% 5.6% 8.8% 16.2% 58.6% 100%
Education 0.4% 0.8% 1.0% 1.7% 2.0% 3.8% 5.1% 9.7% 22.9% 52.7% 100%
Restaurants and hotels 1.6% 2.2% 3.4% 3.0% 3.9% 5.7% 8.2% 8.8% 16.7% 46.4% 100%
Miscellaneous goods and services 0.4% 1.0% 1.3% 1.8% 2.6% 3.6% 5.2% 9.4% 19.2% 55.4% 100%
Other unclassified expenses 0.5% 1.0% 1.6% 2.3% 2.8% 3.8% 5.4% 8.9% 16.4% 57.2% 100%
Total 1.0% 1.7% 2.4% 3.0% 3.7% 4.7% 6.3% 9.6% 17.3% 50.3% 100%
2.8% 5.1% 8.1% 11.8% 16.5% 22.9% 32.4% 49.7% 100.0%
%
Expenditure deciles Total
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IES, Stats SA, 2005/06
(% expenditure by expenditure group)
33
R million Lower 2 3 4 5 6 7 8 9 Upper
Average household size 2,6 3,4 4,0 4,3 4,6 4,8 4,7 4,5 3,9 3,5 3,8
Main expenditure group
Food and non-alcoholic beverages 4.6% 5.7% 6.4% 7.5% 8.1% 9.1% 9.8% 11.4% 14.8% 22.5% 100%
Alcoholic beverages and tobacco 3.7% 4.6% 4.5% 5.8% 6.4% 9.0% 10.6% 11.9% 17.3% 26.1% 100%
Clothing and footwear 3.3% 4.0% 5.0% 6.1% 6.7% 7.8% 9.7% 12.3% 17.3% 27.8% 100%
Housing, water, electricity, gas and other fuels 1.6% 1.9% 2.4% 2.8% 3.2% 3.9% 5.4% 9.3% 20.1% 49.4% 100%
Furnishings, household equipment and routine
maintenance of the dwelling 1.8% 2.6% 3.6% 4.4% 4.6% 6.1% 7.2% 10.4% 16.6% 42.7% 100%
Health 1.6% 2.5% 2.9% 3.5% 4.4% 5.2% 5.4% 9.2% 18.4% 46.9% 100%
Transport 1.1% 1.5% 1.6% 2.0% 2.3% 3.4% 4.5% 8.1% 22.1% 53.4% 100%
Communication 1.7% 2.1% 2.8% 3.3% 4.1% 4.8% 7.1% 10.4% 19.7% 44.0% 100%
Recreation and culture 1.0% 1.2% 2.0% 2.4% 3.1% 4.3% 5.8% 8.2% 17.8% 54.1% 100%
Education 1.8% 2.0% 2.2% 3.1% 3.3% 3.5% 6.2% 15.8% 21.7% 40.5% 100%
Restaurants and hotels 3.9% 2.6% 3.0% 3.4% 4.2% 6.3% 7.6% 8.9% 18.7% 41.4% 100%
Miscellaneous goods and services 1.1% 1.4% 1.8% 2.7% 2.9% 3.8% 5.1% 9.7% 20.6% 50.8% 100%
Other unclassified expenses 1.3% 1.6% 2.2% 2.8% 3.3% 5.1% 6.3% 10.1% 18.0% 49.4% 100%
Total 2.0% 2.5% 3.0% 3.7% 4.1% 5.1% 6.4% 9.8% 19.3% 44.3% 100%
4.5% 7.5% 11.2% 15.2% 20.3% 26.6% 36.4% 55.7% 100.0%
%
Income deciles Total
IES, Stats SA, 2005/06
(% expenditure on books, etc. and education)
34
Lower 2 3 4 5 6 7 8 9 Upper
Average household size 2,6 3,4 4,0 4,3 4,6 4,8 4,7 4,5 3,9 3,5 3,8
Third expenditure group
Books 0.05% 0.06% 0.07% 0.07% 0.10% 0.12% 0.13% 0.18% 0.25% 0.22% 0.19%
Newspapers and periodicals 0.19% 0.24% 0.29% 0.31% 0.33% 0.37% 0.55% 0.59% 0.41% 0.39% 0.41%
Miscellaneous printed matter 0.00% 0.00% 0.00% 0.01% 0.00% 0.01% 0.01% 0.01% 0.01% 0.02% 0.02%
Stationery and drawing materials 0.23% 0.22% 0.25% 0.25% 0.20% 0.21% 0.19% 0.18% 0.17% 0.11% 0.15%
Sub total books & stationery 0.47% 0.52% 0.61% 0.64% 0.63% 0.71% 0.87% 0.96% 0.84% 0.74% 0.77%
Education 0.92% 1.10% 1.02% 1.34% 1.27% 1.94% 1.93% 2.46% 3.20% 2.53% 2.42%
Pre-primary and primary education 0.40% 0.49% 0.45% 0.42% 0.41% 0.47% 0.46% 0.62% 0.79% 0.62% 0.61%
Secondary education 0.47% 0.47% 0.42% 0.41% 0.40% 0.52% 0.53% 0.55% 0.61% 0.74% 0.64%
Tertiary education 0.03% 0.11% 0.11% 0.44% 0.39% 0.88% 0.87% 1.23% 1.73% 0.76% 0.93%
Education not definable by level 0.02% 0.03% 0.04% 0.07% 0.07% 0.07% 0.07% 0.06% 0.07% 0.42% 0.24%
Expenditure deciles Total
%
3/23/2011
18
IES, Stats SA, 2005/06
(% expenditure on books, etc. and education per expenditure
deciles)
35
Lower 2 3 4 5 6 7 8 9 Upper
Average household size 2,6 3,4 4,0 4,3 4,6 4,8 4,7 4,5 3,9 3,5 3,8
Third expenditure group
Books 0.28% 0.56% 0.84% 1.02% 1.85% 3.06% 4.45% 8.90% 22.47% 56.58% 100%
Newspapers and periodicals 0.48% 1.00% 1.66% 2.27% 3.01% 4.28% 8.47% 13.96% 17.40% 47.47% 100%
Miscellaneous printed matter 0.00% 0.00% 0.00% 1.18% 1.18% 2.35% 2.35% 8.23% 16.49% 68.23% 100%
Stationery and drawing materials 1.52% 2.57% 3.87% 4.92% 4.92% 6.56% 7.73% 11.23% 18.87% 37.82% 100%
Sub total books & stationery 0.63% 1.18% 1.86% 2.46% 3.06% 4.39% 7.20% 12.04% 18.94% 48.24% 100%
Education 0.39% 0.80% 1.00% 1.65% 1.95% 3.80% 5.06% 9.75% 22.87% 52.73% 100%
Pre-primary and primary education 0.68% 1.41% 1.73% 2.06% 2.50% 3.70% 4.82% 9.71% 22.40% 50.99% 100%
Secondary education 0.75% 1.28% 1.56% 1.89% 2.34% 3.82% 5.21% 8.29% 16.48% 58.37% 100%
Tertiary education 0.04% 0.21% 0.29% 1.42% 1.56% 4.50% 5.94% 12.72% 32.28% 41.05% 100%
Education not definable by level 0.07% 0.22% 0.37% 0.88% 1.10% 1.33% 1.84% 2.35% 4.86% 86.96% 100%
Total 1.02% 1.74% 2.35% 2.97% 3.71% 4.73% 6.34% 9.58% 17.28% 50.27% 100%
%
Expenditure deciles Total
Estimated Household expenditure &
VAT, 2009
36
R million Expenditure Est. VAT
Books 2 831 348
Newspapers and periodicals 6 013 738
Miscellaneous printed matter 223 27
Stationery and drawing materials 2 243 275
Sub total : Books & stationery 11 310 1 389
Sub total : Education 35 587
Pre-primary and primary education 8 939
Secondary education 9 425
Tertiary education 13 657
Education not definable by level 3 566
2009
3/23/2011
19
37
Concluding remarks
• “The VAT has been seen as a key instrument for securing
macroeconomic stability and growth by placing domestic revenue
mobilization on a sounder basis, so that the IMF has attached
considerable importance to its proper design and implementation”.
• “Has the VAT lived up to its promises as an efficient, and fair source of
revenue?” ( IMF: The Modern VAT, 2001).
• The proposal to zero books is not supported.
• If there is a case to support students it should be done more directly and
on budget.
• Resources should be made available for school and public libraries to
ensure better access to reading material for all citizens.
38
Thank you