SA loses extra R1bn tax revenue to illegal cigarettes

CAPE TOWN – South Africa is losing an extra R1 billion, now at least R8 billion in total, to illegal cigarette companies who aggressively grew their distribution and sales in the last three months. 

The #TakeBackTheTax (TBTT) Campaign called this development, revealed by new research from Ipsos, “a terrible indictment on the SA Revenue Service (Sars)”.

The new Ipsos report, released on Tuesday, showed that illegal cigarettes had now captured more than 42 percent of the South African informal trade and were available in three out of every four shops in the country.

#TakeBackTheTax spokesperson, Yusuf Abramjee, said he was shocked by rapid growth in the illegal cigarette crisis, especially after a promised crackdown by Sars.

“We now have a situation where the biggest selling brand in South Africa, RG, is an illegal brand. That has, apparently, never happened before in any country in the world,” said Abramjee.

#TakeBackTheTax can also reveal that Sars’s failure to act against tax dodging manufacturers has now cost the country yet another R1 billion, with lost tax revenue going from R7bn to a massive R8bn. 

“This is unacceptable and our biggest worry is that this figure will continue to rise even further - hitting the R10bn mark, if Sars continues to turn a blind eye to this illegality” said Abramjee. 

Abramjee called on Sars to stop playing games with this issue and to actually start acting, as promised. “If this is a Sars crackdown then the multibillionaire bosses of the illegal companies must be rolling on the floor laughing.”

He said there was also an added worry around small traders who were now at risk since illegal cigarettes were liable to seizure by Sars. 

Abramjee said: “These massive companies, taking in billions of Rands in illegal profits, right under the nose of our law enforcement authorities are getting away scot-free while small traders take all the risk of seizure and closure for selling illegal cigarettes”. 

#TakeBackTheTax said it welcomed the move by some retailers who were now taking action. Supermarket chain, Spar has decided to remove all illegal cigarettes from their shelves until their makers start paying their taxes. 

BUSINESS REPORT ONLINE