Smartphones are officially ‘luxury items’ in SA – and they’re getting taxed as such

While higher-income South Africans will not face a wealth tax after this year’s budget, they are expected to contribute to the budget in other ways.

This includes an increase in estate duty for properties worth R30 million or more (from 20% to 25%) and higher excise duties on luxury goods (from 7% to 9%).

“A less complex means of applying higher taxes to luxury goods is to increase ad valorem excise duties,” explains Treasury’s official budget review.

“Government proposes to increase these rates, which are already applied to some goods that are consumed mainly by wealthier households (such as cosmetics, electronics and golf balls).

“The associated revenue-raising potential is not significant, but it is aligned with the progressive structure of the tax system,” it said.

Ad valorem products include – among others items – motor vehicles, electronic equipment, cosmetics, perfumeries and other products generally regarded as “luxury items” – and are subjected to the payment of Ad Valorem Excise Duty if used within the Southern African Customs Union (SACU).

However this list will now also explicitly include smartphones, Treasury said

“Effective 1 April 2018, the maximum ad valorem excise duty for motor vehicles will be increased from 25% to 30%, and the classification of cellular telephones will be updated to include ‘smartphones’ to ensure they attract ad valorem excise duties.”

“In addition, the ad valorem excise duty rates (now at 5% and 7%), will be increased to 7% and 9%, ensuring that households spending more on luxury goods contribute proportionately more to revenue,” it said.

Treasury said that government also plans to consult on a proposal to replace the flat rate for cellphones with a progressive rate structure based on the value of the phone.

Read: Rand strengthens as budget speech avoids nasty surprises

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Smartphones are officially ‘luxury items’ in SA – and they’re getting taxed as such