An almost year-long battle with the South African Revenue Service (Sars) has come to an end with the scrapping of ad-valorem duties on two-way radios. According to Robyn Bartholomew, general manager of Customs at Aims Global Logistics (AGL), the new regulations were gazetted on March 23 and approved on April 1 this year. However, there was no reference made to two-way radios and the subsequent announcement in February’s budget speech was directed to the higher-income household market. As a result, companies kept using the pre-existing tariff headings for more than a year. Bartholomew added that the tax authority had also failed to pick up irregularities in the new duties. “Sars had seemingly not done due diligence. It resulted in the two-way radios defaulting according to the new tariff sub heading which stated: “apparatus designed for use when carried in the hand or on the person”. “Consequently they lumped it all in for 9% ad-valorem increase, a duty on luxury items, which two-way radios aren’t.” Bartholomew said she had issued correspondence to Sars to raise concerns regarding the broad description included in Part 2B of Schedule 1 of the Customs and Excise Act of 1964, the reason being that it was interpreted to include two-way radios, and not only smart phones. She explained that this was because two-way radios were specifically designed for use when carried on a person. A customs tariff researcher at Sars advised that twoway radios did indeed fall within this category and were therefore subject to an ad-valorem excise duty of 9%. Bartholomew said “this was confirmed by the relevant Sars official on July 17, who further noted that this duty is levied as a result of the finance minister’s budget speech”. Given that the major consumers of two-way radios in South Africa are the military and police force, Bartholomew added that she was astonished that they had received such a hefty tax increase and were classified as “luxury” items. “How do you add an ad-valorem increase of 9% on products mostly used by government entities and service people, the main end-users of two-way radios? It doesn’t make sense.” She stressed that the levying of ad-valorem excise duties on two-way radios was, in AGL’s view, irrational and would, instead of easing the burden on the fiscus, place further strain on the state’s finances because the biggest groups of consumers making use of two-way radios were state entities, specifically within the military and police sectors. In addition, two-way radios are used to a large extent by the security and construction sectors, on which the police depend to assist with maintaining security, especially with regard to health and safety. Bartholomew emphasised that through AGL’s intervention, at least two companies had been saved a combined sum of R34 million, as just one of the companies was on the verge of paying Sars a total of R29 million because of erroneous declaration enforcement by the revenue service. It wasn’t plain sailing for AGL though. Bartholomew said they constantly had to navigate obstacles and break down barriers at Sars. “I took it up with all the various staff departments and raised it in all the relevant stakeholder meetings. I was sent from pillar to post, and in the end it was all because of due diligence that was not followed to ensure the right regulations were in place.”
INSERT: How do you add an ad-valorem increase of 9% on products mostly used by government entities and service people? – Robyn Bartholomew