Finance minister Trevor Manuel`s scrapping of the ad valorem tax on computer printers came as no surprise to the industry, and no significant price cuts are expected.
Yesterday in his 2004/05 Budget speech before Parliament, Manuel said ad valorem duties would be scrapped on a number of imports, including computer printers, photocopiers, magnetic tapes, recorded music, print film, and watches and clocks.
Importers and resellers of computer printers had anticipated the scrapping of the tax, since the ad valorem duty on PCs was done away with last year. Furthermore, the strength of the rand exchange rate has also largely overshadowed tax`s effect on prices.
Hans Horn, MD of Lexmark International SA, says the impact of this tax waiver was felt last year and those benefits were transferred immediately to his customer base. He does not expect "any additional changes to be made this year".
Paul Susan, COO of retailer Incredible Connection, says the stronger rand exchange rate of the past year has been a major factor in pulling down the prices of imported products such as printers and so the dropping of the tax will have little, if any, impact.
Zii Sithole, director at HP South Africa`s Imaging and Printing Group, says this is good news as it will help speed up efforts in bridging the digital divide by making products more affordable through the acceleration of the general decline in unit prices.
"However, the announcement will put pressure on the channel margin and profitability," Sithole says.
Michael Stanley, marketing manager of Gestetner, says he believes the elimination of the ad valorem duties is good news for the market as it will make it more affordable for entry-level users to purchase printer and photocopier equipment. The desktop printing market in particular should benefit from this announcement as these products were taxed more in the past.
He says IT procurement in various businesses might be under pressure now to purchase cheaper desktop printers as opposed to multifunctional products.
"Although they will enjoy cost-saving in the short-term, it will be a false economy as the total cost of ownership of these products will place financial strain on the business in the long run," Stanley says.
An ad valorem duty is one levied on the value of goods, rather than on a flat rate, and has been increasingly difficult to administer over the years due to currency exchange rate fluctuations.
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