SARS document reveals planned smartphone tax changes

Finance minister Enoch Godongwana was on track to announce a tax break on smartphone imports during his budget speech on Wednesday, according to a South African Revenue Service (SARS) document MyBroadband has seen.

The document, which summarised all the matters relating to tax Godongwana would have announced, stated that luxury goods taxes on cheaper smartphones were going to be scrapped.

It does not state the cost threshold at which a smartphone would be exempt from ad valorem excise duty.

Although it is not guaranteed that this tax exemption will be implemented since Godongwana’s budget presentation was postponed, its inclusion in the SARS document is encouraging.

Parliamentary speaker Thoko Didiza adjourned proceedings, informing ministers that President Cyril Ramaphosa’s cabinet couldn’t agree on the budget.

Rather than present a budget that would be voted down, the parties in the Government of National Unity have agreed to delay the Budget Speech until they can reach a more mutually acceptable solution.

Ramaphosa reportedly called an emergency cabinet meeting ahead of Godongwana’s budget speech to allow him to address parties within the GNU about his proposals.

“We have decided to adjourn proceedings for a date to be determined by the programming committee,” said Didiza.

“While today we have gathered here to have the Minister of Finance presenting the budget, there has not been agreement in terms of parties in the executive to find one another in proposals of the budget.”

She said postponing the event would give the cabinet enough time to reexamine and present the budget in March.

The Democratic Alliance (DA) has said the disagreement was about the ANC’s plan to hike VAT from 15% to 17%.

One of the DA’s ministers in the GNU, communications minister Solly Malatsi (pictured), previously said that he approached National Treasury with a proposal to scrap ad valorem duties on cheaper smartphones.

This was to make it more affordable for people to switch to 4G and 5G devices, which would help migrate traffic off older 2G and 3G networks.

Once fewer South Africans relied on the legacy network technologies, the government and industry could decide on a deadline for switching off 2G and 3G.

“One of my obsessions is looking at the declassification of smart devices as luxury items because they carry an additional tax,” Malatsi told MyBroadband during an earlier interview.

He explained that the ad valorem tax SARS charged on smartphones substantially increased their price relative to many overseas markets.

“We are not saying remove all the associated luxury goods taxes on smart devices, but have a threshold,” Malatsi said.

A threshold would make devices over a set amount considered luxury items, attracting ad valorem, while cheaper devices would be exempt from the tax.

Malatsi’s comments regarding luxury goods taxes on smartphones were part of an answer about the deadlines for blocking 2G and 3G device imports and ultimately switching off these older networks in South Africa.

His predecessor and current deputy minister, Mondli Gungubele, set deadlines for banning new 2G and 3G devices from being brought into South Africa in its Next-Generation Radio Frequency Spectrum Policy.

First, Gungubele wanted type approvals on all new 2G and 3G devices halted by 30 September 2024.

This means the Independent Communications Authority of South Africa would no longer approve new 2G and 3G-only devices, effectively blocking them from being sold locally.

Devices already type-approved in South Africa can still be legally imported and sold.

After blocking type approvals, Gungubele wanted to ban networks from activating any new 2G and 3G devices on their networks on 31 December 2024.

The plan then makes provision for network operators to begin shutting down their legacy networks from 1 June 2025.

By 31 December 2027, he wanted 2G and 3G completely decommissioned in South Africa.

However, South Africa’s cellular network operators, through the Association of Communications and Technology (ACT), have lobbied for an industry-led switch-off of 2G and 3G.

While Vodacom and MTN have told MyBroadband that they support government intervention to help make 4G and 5G devices more accessible, they are not in favour of an arbitrary switch-off deadline.

South Africa’s two biggest network operators said they were already gradually migrating from legacy 2G and 3G technologies to modern 4G and 5G.

MTN says in a notice on its website that it aims to switch off its 3G network by 31 December 2026. It has not given a date for shutting down its 2G network.

It also recently conducted a successful 3G switch-off pilot in several Cape Town neighbourhoods.

MTN told MyBroadband that the 2024 pilot included Durbanville, Greater Melkbosstrand, Cape Town suburbs, and the Milnerton Bloubergstrand areas in Cape Town.

“The pilot aimed to assess the migration process and optimise future rollouts,” an MTN spokesperson said.

“Following its success, MTN is implementing a phased migration approach, with full transition planned for completion by 31st December 2025. Throughout this process, MTN remains committed to delivering excellent connectivity and minimising disruption to customers.”

It reaffirmed that its national switch-off date for its 3G network remained 31 December 2026.