South Africa: ad valorem duty for monitors and TV
The SA Revenue Service (Sars) has come out in strong defence of a new ad valorem duty on computer monitors, saying it’s meant to protect the television industry, despite strong opposition to the new tax.
Sars spokesman Adrian Lackay says it is government policy to protect the local TV industry in “an effort to achieve domestic investment, value addition and employment”.
In April, a 7% ad valorem tax, which previously only applied to imported television sets and which was scrapped seven years ago, was reintroduced on computer monitors, because some companies were importing them without TV components and adding these locally to avoid the tax.
The result is more expensive monitors in an industry that’s meant to be trying to make its products as cheap as possible to get more South Africans online.
Lackay says that due to constant changes in technology, monitors and TVs have “largely become interchangeable in their application”.
“This poses challenges from a legislative and administrative point of view and it makes it difficult to give effect to trade and tax policy,” he says. “Different duty structures in this instance led to the abuse of legislation, which undermined government policy.”
Lackay says “unscrupulous importers” were found to be declaring imports as computer monitors to avoid the duty. These devices then made their way into the local TV market “to the detriment of the local television industry”.
The ad valorem duty for monitors and TVs of a specified size “was aligned” in the hope of preventing “further abuse”. Lackay says that because there is no longer any tax benefit in clearing televisions as monitors “this alignment is a step closer to giving effect to government policy”.
The changes, he says, might “lead to the payment of ad valorem duty on larger monitors on one hand and the non-payment of ad valorem duty on smaller TVs. However, this is due to the convergence of technologies in these particular industries.”
On 13 May, the International Trade Administration Commission of SA invited the computer and TV industries “to engage with government agencies, including Sars, with regard to the payment of unintended taxes – that is, on goods not manufactured locally — provided that a clear distinction could be made between computer equipment and television equipment”.
Lackay says that from Sars’s discussions it appears that some industry players are “reorganising their business and are considering importing parts for assembling computer monitors and televisions”.
“This shift in the industry indicates that the legislative changes may positively impact domestic investment and employment,” he says. “Aligned with this natural development in the industry, government is willing to consider the development of the computer monitor industry in a similar way as the television industry.”