Rise in food prices and consumer behavior
Value-Added-Tax (VAT) increase is a major problem to low income earners, the poor and has effect on people’s daily life. According to (Haupt, 2018) “Value-Added-Tax is an indirect system of taxation which came into effect on 30 September 1991”, which is in the end carried by the final consumer. The one percent expansion in VAT expands the costs of locally created goods and imported items also. This will lessen the acquiring intensity of the household and thus bring down request. (Erero, 2015:7). At the point where VAT builds additional costs increment however income continues as before which implies that shoppers will go for less expensive items (Ahmed ; Zaman, 2015:108) or rather not have the capacity to bear the cost of fundamental items like garments which are standard rated supplies.
Households who are the suppliers in this case are in for the loss. When consumers turn to substitutes, the revenue of the the opposite side decreases. Consumer behavior is very essential for the organizations who are in the retail business because they depend on the consumers for income, through sales.
When the prices of food increase so does pressure on the poor and low-income group. The net buyers of food are the low-income earners who spend a large portion of their income on those basic essentials, which most are zero rated supplies but are we now saying that these people do not buy products from the standard rate supplies batch?
Households that determine extensive extent of their income from the creation and sale of those merchandise will be positively influenced. The current zero rated essential food products, for example, maize meal and brown bread will restrain the effect on the poorest families. Furthermore, the state is in the process of extending the zero-rated supplies list including products like white bread, and as a result the low-income earners will afford more of the goods they need in their day to day lives. The government uses a fraction of the one percent increase to provide the vulnerable citizens with public goods and services, grant social securities in the quest to assist the low-income earners with the basic thigs they need in their day to day lives. ?
Haupt, P., 2018. Notes on South African Income Tax. 37th ed. Roggebaai: H ; H Publications.
Erero, JL. 2015. Effects of Increase in Value Added Tax: A Dynamic CGE Approach. Economic Research Southern Africa. Working paper no. 558:17
Ahmed, M and Zaman, F. 2015. Vat Increase and Impact on Consumers’ Consumption Habit. Asian Journal of Finance & Accounting. 7 (1):107-108.