South Africa: Set-top boxes a 'luxury'

Broadcast

Set-top boxes attract a 7% luxury tax, which will spill over to the end price, despite a court bid by MultiChoice to have the devices classified under a cheaper regime. The set-top boxes that South Africans will need to keep watching television when analogue broadcast is turned off at the end of 2013 could cost consumers as much as 20% more at the till, because of a tax classification.

South Africa is gearing up to switch over to digital television, and every household will require either a television with a digital tuner, or a decoder to convert the signal so that it can still be viewed on older analogue televisions.

However, the vital decoders are classified as luxury items under ad valorem excise tax tariffs and attract a 7% tax, because they are classified as television “reception apparatus”. Consequently, the boxes could be as much as 20% more expensive by the time the consumer checks out at the till point, earning the taxman as much as R800 million in additional tax.

Ad valorem excise taxes are charged on locally-manufactured items that are deemed to be luxuries. The category includes televisions, fridges, cosmetics, dishwashers and cellphones.

Set-top boxes were initially expected to cost around R700, but this was based on South Africa migrating using the European DVB-T standard and not the upgraded version, DVB-T2. SA decided to migrate using DVB-T2 earlier this year.

Local decoder prices are not yet available, as they cannot be manufactured until several issues surrounding migration are cleared up. However, boxes retail in the UK at between £60 and £100 – or between R572 and R953.

About 10 million boxes will be needed so that South Africans can continue watching television after the analogue signal has been turned off, according to previous Department of Communications (DOC) estimates.

About half of these will be subsidised by government, says spokesman Tiyani Rikhotso. He says the DOC anticipates subsidising these boxes by about 70% out of the R2.45 billion that government has earmarked to aid the poor in continuing to receive a digital signal.