As the discussion around the VAT-free basket heats up and the deadline for public comments to Treasury about the Woolard Panel's findings come and go, some detractors question whether the fiscus can afford the knock it will take if new items are added to the VAT-free basket of goods. But while there will be a loss, the potential gains merit serious consideration.

In a recent address to the Standing Committee on Finance, Treasury's head of tax and financial sector policy, Ismail Momoniat, stated that Treasury was also working on its own estimates to determine if the revenue gap would only be R4.8-billion as estimated by the Woolard Panel if all items were included, or if there could be an upside risk of additional amounts.

He said that the big issue of the revenue gap would most likely be dealt with in the medium-term budget. The minister may announce expenditure adjustments, or tax adjustments if there were a gap, he said.

There is no doubt that National Treasury finds itself in a tight spot. On the one hand it has to collect the revenue it needs to pay the country's bills; on the other, it has to...