93% of smokers are buying illicit cigarettes in SA, government loses out on billions
DURBAN - British American Tobacco South Africa (BATSA) said the recent study by the University of Cape Town’s economics research unit has proven the continued ban on tobacco sales is causing more harm than good to the tobacco industry and the country.
The independent study by the research unit on the economics of excisable products (Reep) found 93% of approximately 11 million smokers in the country are still able to purchase cigarettes despite the ban that has lasted for almost four months.
Johnny Moloto, BATSA’s head of external affairs, said at the moment the tobacco market in South Africa was being run and dominated by illicit suppliers who were breaking the law and making billions of rands in illicit profits.
“The market has been completely taken over by illicit cigarette suppliers at the expense of law-abiding and tax compliant manufacturers, like BATSA, and the fiscus continues to lose R35 million in taxes every single day,” Moloto said.
He added that after 118 days of lockdown, the ban on tobacco products sales had now cost more than R4 billion in excise taxes and led to substantial job losses.
The research also claims there had been a a 430% increase in the number of people sharing cigarettes, and potentially exposing themselves to the Covid-19 outbreak, and the findings stated this was largely due to the high price of the illicit products which on average were 250% higher compared before the lockdown was implement on March 27.
BATSA contributed R13bn in taxes every year and has called for significant new resources to be allocated to the South African Revenue Service (Sars) to ensure the market can be taken back from criminals after the ban has been lifted.
“These illicit suppliers are not going to become compliant and start obeying the law and pay taxes when the ban is eventually lifted. They evaded taxes prior to the lockdown and they have made billions tax-free during the ban and they will evade taxes after the ban,” Moloto said.
He added if the country was to capture any of the taxes it so desperately needed, then SARS needed to be allocated the required resources to establish a nationwide task force.
“It is uneconomic to retail a pack of cigarettes at less than R25, if taxes are being paid. Anything selling below that number should be considered suspicious and investigated,” he said.