South Africa to Remove Luxury Tax on Basic Smartphones for Digital Inclusion

The South African government will eliminate luxury excise duty on smartphones under R2,500 from April 1, 2025, to support digital inclusion for low-income households. This aligns with plans to phase out 2G and 3G networks by December 2027, raising concerns about potential digital inequality. Communications Minister Solly Malatsi emphasized the need for tax reductions to enable affordable technology access.

The South African government has announced the removal of the luxury excise duty on smartphones priced below R2,500, effective 1 April 2025. This decision aims to enhance digital accessibility for low-income households, as the current ad valorem excise duty is applied at a rate of 9%. The Treasury stated that the reduced duty will better support efforts to improve smartphone affordability in this price range.

The initiative coincides with South Africa’s plan to completely phase out 2G and 3G networks by 31 December 2027, which is intended to allocate bandwidth for advancing 4G/LTE and 5G networks. However, there are concerns regarding the potential digital divide that may arise, as many low-income consumers, especially in rural areas, could find it difficult to upgrade to newer smartphones that support faster networks.

Communications Minister Solly Malatsi has previously highlighted that current ad valorem excise duties inflate the cost of smart devices. He mentioned being in discussions with the Treasury about the necessity to lower these taxes to facilitate access to technology, especially for those in underserved communities.

Overall, the removal of the luxury tax on basic smartphones signifies a crucial effort towards increasing digital inclusion in South Africa, enabling more citizens to access essential connectivity tools.

In conclusion, the South African government’s elimination of the luxury excise duty on lower-cost smartphones serves as a significant step toward improving digital access for low-income households. By setting the threshold for this tax relief at R2,500, the initiative aims to make technology more affordable amid concerns over transitioning away from older network systems, ensuring that all citizens can participate in a rapidly evolving digital ecosystem.

Original Source: techcentral.co.za