Smartphones To Suffer ‘Luxury Goods’ Tax

The 2018 Budget Speech was no real surprise to anyone. Tax is due to go up on pretty much everything, including your nice new smartphone.
Jason
Snyman
Published: Wednesday, February 28th 2018
General
The 2018 Budget Speech delivered by our incredibly unpopular Minister of Finance brought a lot of things into perspective. Before we get into how smartphones are soon to be classified as luxury goods, and be taxed accordingly, there are a few things worth mentioning. Consider it a build-up to the dreaded smartphone tax finale. For years, South African students have been making a big scene over free higher education. Now, thanks to plans laid out by comrades Zuma and Gigaba, they’re finally going to get it. Little did they know, though, that they would pay for it in so many other ways.

Sin Tax Set To Increase

Brace yourselves, Randfontein readers, because brandy is soon to become unaffordable. Among the expected increases in ‘sin tax’, student-staples such as booze and cigarettes are a definite. Alcohol and Tobacco excise duties are up by between 6% and 10%. Cigarettes, for one, will see an increase in price of 8.5%. Banking and asset management group, Investec, stated that ‘excise taxes on alcohol and tobacco are likely to continue increasing at an above inflation rate, as has been the case since 2002.’ In the last five years, the tax on cigarettes has increased by R3.97 per pack of 20’s. The tax on a bottle of alcohol has also gone up by R20.54. These are just some examples of how relentless the increases have been. Altogether, the hikes this year could bring in an additional R1.33 billion in tax revenue. So, if you’ve ever wanted to kick those habits, now may be the best time. Of course, these weren’t the only items on the agenda. More notably, in April, fuel will be going up by more than 50c per litre. Oh, and VAT will rise by 1%, an increase not too many people saw coming. South Africans will surely feel the pinch, as we continue to pay for Zuma’s destruction of the economy. Gigaba insists that the increase in VAT will not have an impact on the poor. By saying so, and actually believing it, he has proven once again how unqualified he is for the job.

Smartphones To Be Taxed As Luxury Goods

The government also plans to increase the tax on luxury goods, proposing to raise the excise duties from 7% to 9%.
“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:
  • Perfumes and Colognes;
  • Cosmetics;
  • Fireworks;
  • Fur and / or artificial fur clothing;
  • Firearms;
  • Video and / or audio recording equipment;
  • Air conditioners;
  • Most other electronic equipment;
  • Motor vehicles;
  • Golf balls.
Because only filthy rich people buy golf balls. This list, however, will now also include smartphones. That’s right, hipsters with your R24 000 iPhone X. What do you say about that? It’s only a matter of time before they come for your Avocado and your Vinyl.
“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.
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