Illicit loose cigarettes 'funding state capture'
In addition, Sars is set to lose R7 billion in taxes this year, the Tobacco Institute of Southern Africa (Tisa) said yesterday.
Research by Ipsos, commissioned by the institute, showed that most cigarettes in the market were sold at below R17.85c a pack, the minimum amount taxed by Sars.
Selling a pack below the Sars minimum taxable amount is illicit. Any manufacturer of such products is in fact evading paying tax, said the institute's Francois van der Merwe.
“The market is flooded with cheap cigarettes, affordable and available to children and the vulnerable, and a threat to jobs in the tobacco industry.
“At least R8bn in cigarette sticks, referred to as loose cigarettes, sold at 50c each are illicit. For only this year, R7bn will be lost to Sars, which is 14% of the R54bn Sars collection shortfall,” said Van der Merwe.
Ipsos’s Zibusiso Ngulube said 4124 shops in South Africa's rural and urban areas were visited to research the illicit cigarette trade.
Researchers found that brands retailing below the minimum R17.85 were found in three out of every four shops visited. Brands from Gold Leaf Tobacco Company make up 75% of all sales below the taxable amount.
Gold Leaf’s brands such as RG has 50% market share, selling at R10.50 a pack, followed by Savannah, retailing at R13.10.
Van der Merwe said almost all illicit cigarettes were manufactured in SA at companies registered by Sars, adding that most of the revenue from the illicit trade funded state capture in South Africa, the same way illegal revenue is used to fund illegal activities across the world. - African News Agency (ANA)