Luxury tax no strain on Gucci purses

25 February 2018 - 00:00 By FARREN COLLINS and PERICLES ANETOS

That small niche of South Africans who are not bothered about checking the price tag on items are unlikely to be ruffled by the increase in import duty on luxury goods.
That is the view of experts, retailers and luxury brand suppliers after Finance Minister Malusi Gigaba's decision to raise the ad valorem excise duty rate by two percentage points, to 7% and 9%.
Affected products include cars, electronic equipment, cosmetics, perfumes and other products generally regarded as "luxury items". They are subjected to additional excise duty if used within the Southern African Customs Union.South African Chamber of Commerce and Industry CEO Alan Mukoki said the wealthy generally didn't care about small increases in excise and import duties as they could afford them. "So the effect [for them] would be negligible. They travel a lot as well, so are likely to do their buying overseas."
Atiyyah Vawda, an analyst at Avior Capital Markets in the luxury goods and retail sector, said that although some consumers of luxury goods did buy locally, most made purchases while travelling abroad.
Vawda said the dynamic around spending on luxury items was more around what it would mean for visitors to South Africa to buy these products.
"I don't think you will have major price changes with the luxury brands selling stuff here. [Retailers] wouldn't change the prices [of goods]," said Vawda.
Donald Kau, spokesman for the V&A Waterfront in Cape Town, did not expect to see a significant shift in the purchasing decisions for high-end luxury goods, "which tend to have income elasticity of demand". The exchange rate was likely to have a greater impact on consumer spend, he said.
"The product category is a fairly broad one and retailers will pay close attention to customer reaction to adjusted pricing."

This article is reserved for Sunday Times subscribers.

A subscription gives you full digital access to all Sunday Times content.

Already subscribed? Simply sign in below.

Registered on the BusinessLIVE, Business Day or Financial Mail websites? Sign in with the same details.

Questions or problems? Email or call 0860 52 52 00.