A recent study by British American Tobacco South Africa Ipsos, revealed crucial evidence that cigarette manufacturers are coining the multibillion industry of illicit tobacco trading.
In the study, Ipsos surveyed a representative sample of 4 600 stores, and found 59% selling illicit cigarettes. Many were brands of the same manufacturers who are blocking SARS from installing CCTV cameras in factories to monitor production.
Acclaimed journalist and founder of Tax Justice SA (TJSA), Yusuf Abramjee, stressed that illicit tobacco trading is worth R24bn. Hence, manufacturers are refraining from installing cameras as the industry is a gravy train.
“These shocking figures explain why some cigarette makers might be so keen to keep Sars’ cameras out of their premises. The survey proves that a core of manufacturers has been flooding the market with tax-evading cigarettes for years. They’re stealing over R24bn in vital excise revenue annually and want to carry on this industrial-scale looting without interference from the taxman. Our new government now has the ideal opportunity to enforce the law, bring these criminals to justice and stamp out this economic sabotage once and for all,” said Abramjee.
Out of 4600 stores nationwide, 59.3% sold illicit cigarettes which hiked up from 27% in 2022.
Surprisingly, Western Cape ranked top with 75.1% of illicit tobacco trading, Eastern Cape trailed behind with 74.4%, followed by Gauteng (73.7%), Free State (73.1%) and KwaZulu-Natal at 67.3%.
In addition, cigarettes are sold for as little as R5 for a pack of 20 – less than one-fifth of the minimum collectible tax (MCT) of R25.05 (R21.78 excise plus R3.27 VAT). The illicit trade is prevalent in the wholesale (82.9%) and 72.2% in informal sectors.
More than half of illicit cigarettes purchased are brands that belong to manufacturers that won a high court interdict against Sars’ CCTV installation in factories.
Carnilinx brands, a member of the Fair Trade Independent Tobacco Association (FITA), accounted for 88% of cigarettes sold at illicit prices, followed by Best Tobacco (75%), United Tobacco (91%), Protobac (100%) including Gold Leaf Tobacco Company (GLTC).
Despite swindling the taxman out of R3bn, GLTC scaled up to 79% of its brands available for less than MCT in May 2024, compared with 28% in March 2021.
Noting FITA should be held accountable as its member, Carnilinx, is evading paying taxes, which is detrimental to the economy, Abramjee said: “This unprecedented criminality is bleeding billions of rand from our fiscus and the ringleaders are stealing from our schools, our hospitals, from our very future. The evidence is clear, it's time for the government to stop these looters in their tracks.
“The message is simple: install Sars cameras, or lose your licence to make cigarettes. The courts must force these companies to obey the law, enforcement authorities must crack down on their wrongdoing and the taxman must recoup the stolen revenue that’s meant to build a better future for all.”
The Star