DA writes to Pravin Gordhan on VAT on books

Dion George, Shadow Minister of Finance
28 January 2010

In light of the upcoming budget, the Democratic Alliance (DA) has today sent a copy of the position paper, Breaking the Barriers to Reading - The DA's proposal to scrap VAT on books, to Finance Minister Pravin Gordhan, to ask him to include the proposals contained in this document regarding the zero-rating of VAT on books, in his budget. (See letter below.)
 
Few things are more important to South Africa than raising our standard of education and improving literacy. International experience shows that removing VAT from books dramatically increases access to all kinds of reading material. 
 
In South Africa, it is estimated that around a quarter of our citizens are illiterate and many households do not have even a newspaper. This step would dramatically improve access to reading materials, cut the cost of school textbooks, expand libraries, and it would make books and other reading materials a much bigger part of the lives of all South Africans.
 
In 2004, former Finance Minister Trevor Manuel rejected a 100 000 signature petition to abolish VAT on books, claiming at the time that 'only the rich will benefit'. But this is very far from the truth. VAT is a regressive tax, which acts disproportionately to benefit low income citizens. This is why basic foodstuffs such as eggs and beans are zero-rated for VAT.
 
We hope the new minister will take a more enlightened approach.
 
While this step would not solve South Africa's illiteracy problem, it would make the problem much easier to solve by making reading materials more accessible.
 

Dear Minister Gordhan,
 
Under current South African legislation all books are subject to the standard 14% rate of value added tax (VAT). Attached you will find a copy of a Democratic Alliance (DA) document proposing that books be zero-rated for VAT.
 
The DA believes that a tax on books is a tax on learning, knowledge and literacy. Right now, we need to prioritise measures to promote literacy and education, and we believe that a zero-rating on books would be a cost-effective measure to contribute towards this.
In numerous countries - including Ireland, Norway, the United Kingdom, Brazil, Mexico, the Philippines, Australia, Ghana, and Kenya - no tax is charged on books at all. Countries that have adopted reduced rates of tax on books include Sweden, Finland, Iceland, China, Austria, France, Germany, Belgium, Cyprus, the Czech Republic, Greece, Hungary, the Netherlands, Spain, Slovakia, Romania, Slovenia, and Malta.
 
The DA estimates that the loss to the fiscus would range between R169m and R274m, depending on whether the decision was made to reduce the VAT rate, or to zero rate. 
 
But the benefits would be enormous. Zero-rated VAT on textbooks will ease access to education and result in the opportunity for citizens to be more productive, which will in turn contribute relatively more to the tax pool. This forms part of a virtuous cycle that will boost our economy.
 
I hope you will be willing to give consideration to this document.
 
Best regards,
 
 
Dr Dion George, MP
Democratic Alliance Shadow Minister of Finance