Supplementary Budget 2020

Estate duty, luxury goods tax to rise

(iStock)
(iStock)

Cape Town - Wealthier South Africans are set to contribute more to the national purse, after Finance Minister Malusi Gigaba announced an increase in estate duty and higher excise taxes on luxury goods. 

Both measures will be effective from March 1 2018.

According to the budget presented to Parliament on Wednesday, estate duty will increase from 20% to 25% for estates worth R30m or more. 

“To limit any staggering of donations to avoid the higher estate duty rate, any donations above R30m in one tax year will also be taxed at 25%,” said Treasury in its budget overview. 

Treasury expects the increase in estate duty to contribute R150m in additional revenue. 

This increase is part of R36bn in additional tax proposals included in the budget. Some R22bn, or 63%, of this increase is set to come from raising the value-added tax (VAT) rate by one percentage point to 15%. 

The estate duty tax increase was not unexpected.

“Changes to the estate duty rate are also possible,” noted Investec in a pre-budget briefing. “The Davis Tax Committee has previously recommended increasing the rate from 20% to 25% of the dutiable value of an estate exceeding R30m.” 

Luxury goods 

The state will also increase the top rate of ad valorem excise duties on some luxury goods from 7% to 9%, expected to bring in just over R1bn in additional revenue. 

The maximum ad valorem excise duty for cars will be boosted from 25% to 30%. Meanwhile, the definition of cellphones will be changed to include smartphones to ensure that they also attract ad valorem taxes. 

Treasury said these measures will ensure that households spending more on luxury goods contribute proportionally more to revenue. 

“Government will also consult to replace the flat rate for cellphones, with a progressive rate structure based on the value of the phone,” it said.  

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