The good news about the VAT hike is the government decision to exempt 19 food items from VAT, to ease the burden on the poor, says Jonathan Hurvitz, financial director at Teljoy and retail industry expert.

These are maize, rice, brown bread, vegetables, dried beans, fruit, samp, vegetables oils, maize rice, legumes, pilchards, eggs, dried maize, milk, cultured milk, powdered dairy blend, milk powder, brown wheaten meal and legumes.

In addition, other non-food items exempt form VAT include municipal rates, illuminating paraffin, residential rental accommodation , public road and rail transport, as well as goods for export.

“The bad news, on the other hand, is that many foods, essential items such as cleaning products and clothing are affected by the VAT hike. So while you won’t pay more in VAT for brown bread, you will for the peanut butter or cheese you put on it. VAT on animal foods will also rise,” he says.

“The ugly or healthy, depending on how you look at it, is that not only is VAT going up on sugary drinks, but the Sugar Tax also comes into effect this month,” he says.

Sugary drinks will thus be taxed if they contain more than 4g of sugar per 100ml. So in the case of a 340ml can of soda that contains 10g of sugar per 100ml, for every gram over the 4g limit an extra 2.1c is levied. A can that used to cost R10 now costs R10.12 as from 1 April 2018.

Hurvitz says the plastic bag levy has increased to 12 cents a bag, and there’s an increase from R6 to R8 on incandescent light bulbs. The good news, says Hurvitz, is that the 1% VAT increase on the cost of credit should be minimal, since the increase only applies to once-off initiation fees on a credit agreement and the monthly administration fee thereafter, as well as the transaction fees on transactional cards.

“The bad news, however, is that this also means that the more credit accounts you have, the more you’ll pay in admin fees. Other factors to consider include a rise in payment on card replacement fees, transfer fees, SMS notifications, statement fees and point-of-sale transactions,” he says.

He advises consumers to cut down on their credit debt as much as possible.

“It can be hard at first, but in the long run you’ll be grateful. Make use of tools such as PriceCheck’s price comparison service, which does the bargain hunting for you. The reality is that the VAT hike is going to hit all South Africans. Most don’t eat dry bread. We all need clothing. But let’s try to be disciplined and shrewd in our spending and look at options that allow us to practice good budgeting. And in just a few years, if revenue from the tax and VAT hikes is properly collected and correctly appropriated, we will all reap the benefits.”

This article was first published by Tygerburger on 18 April 2018