CNBC Africa

South Africa Budget Day

SA #Budget2018: A tax on the wealthy, and smartphones

PUBLISHED: Wed, 21 Feb 2018 15:41:12 GMT

Monique Vanek

(PRETORIA) South Africa’s Budget 2018 speech and review was an uplifting read unlike Finance Minister Malusi Gigaba’s 2017 Medium Term Budget Policy Statement (MTBPS), which led South Africa down a spiral characterised by slow economic growth, recession, ratings downgrades, and heightened concerns regarding the governance and sustainability of key state-owned companies.


Even Gigaba’s Budget lockup press conference on Wednesday was more upbeat than last year’s MTBPS’s. He had the confidence and swagger of man who believes he has averted further downgrades for South Africans. But for the wealthy and lovers of the finer things in life from smartphones to Gucci handbags – Budget 2018 makes for sombre reading.

If you’re wealthy or love the finer things in life this is how you’ll be impacted

  • VAT rate to increase from 14% to 15%. The wealthiest 30% of households contribute 85% of VAT revenue.
  • Products such as rye or low GI bread which are more expensive will not be zero-rated. This type of bread tends to be consumed by richer households.
  • There’ll will be no adjustments to the top four income tax brackets
  • Ad-valorem excise duty rate on luxury goods to increase from 7% to 9%.
  • Effective 1 April 2018, the maximum ad valorem excise duty for motor vehicles will increase from 25% to 30%.
  • Classification of cellular telephones will be updated to include “smartphones” to ensure they attract ad valorem excise duties.
  • Government will consult on a proposal to replace the flat rate for cellphones with a progressive rate structure based on the value of the phone.
  • From March 1 a higher estate duty tax rate of 25% for estates greater than R30mn will be introduced. To limit the staggering of donations to avoid the higher estate duty rate, any donations above R30mn in one tax year will also be taxed at 25%.