“A less complex means of applying higher taxes to luxury goods is to increase ad valorem excise duties,” Gigaba said. “Government proposes to increase these rates, which are already applied to some goods that are consumed mainly by wealthier households.”For those who don’t know what ad valorem goods are, these are items which are taxed according to value. So, the amount of tax will depend on the value of the property. Examples of items which are taxed ad valorem include:
“The associated revenue-raising potential is not significant, but it is aligned with the progressive structure of the tax system,” said Gigaba. “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.”So, what does this all really mean? Simply put, households who spend more on luxury goods will now contribute proportionately more to tax revenue. Buckle up, South Africa. 2018 is going to be one of those 2-Minute Noodle years.