Fawu has marched to the Sars HQ to call for a clampdown on illegal trade.
Billions of rand can easily be brought into over-stretched-state coffers if illicit trade is addressed with urgency.

South Africans were shocked in October when then finance minister Malusi Gigaba informed the nation in his mid-term Budget speech that a drastic decline in economic growth, coupled with “a sharp deterioration” in tax collections, had led to a tax revenue shortfall of R50.8billion - the largest under-collection since the 2009 recession.

Since then, Gigaba has announced a 1% VAT increase - the first in our democratic era - to try to address the shortfall, before Nhlanhla Nene replaced him as the person holding the purse strings.

No matter who is in charge, it seems the plan is for South Africans to foot the bill for the shortfall. The revenue shortfall means the government has less money for service delivery.

But Treasury and the SA Revenue Service (Sars) are missing a trick. They have a significant, untapped source of income not being considered in the rush to find ways to plug the fiscal gap: taxing the ever-growing black market.

I joined the Food and Allied Workers Union (Fawu) in Pretoria this week. Thousands marched on the Sars HQ to say #FightIllicit.

We should all be concerned that the revenue collections’ authority is not doing enough to clamp down on illicit traders and, by implication, tax evaders. This has implications on legitimate jobs and, literally, the health of our country, given the health risks associated with illicit products such as alcohol and tobacco.

Today’s Sars either doesn't have the capacity or the willingness to enforce laws and regulations against illicit traders and tax evaders. It has the mandate, but instead we witness billions of rand missing the government tax net, with seemingly no plan from Sars to address this.

The illicit economy is growing at a rapid pace and urgent action needs to be taken to curb and reverse this.

Sars has also not done enough to address illicit financial outflows out of South Africa, put at nearly R60billion in the 2015/16 fiscal year. Similarly, domestic illicit trade in tobacco and alcohol is estimated at billions of rand in lost tax revenue.

If the government eliminates - or even reduces - the illicit economy, we can reduce the challenge of revenue shortfalls.

The rise in the illicit trade in tobacco and alcohol also poses a serious threat to jobs in affected industries. Amid the jobs crisis, we cannot afford any more job losses. For instance, the country’s largest cigarette manufacturer, British American Tobacco SA, has cut its factory manning levels and numbers of tobacco leaf growers because of the increase in illicit trade.

The company estimates that 10000 workers’ jobs are at risk, and Fawu and other unions are understandingly angry.

Another example is in the poultry industry, hit by job losses due to the surge in dumped chicken on our shores.

Add to this the Health Promotions Levy (HPL), known as the sugary and sweetened beverages tax, which will result in estimated job losses of between 5000 and 8000 in the legitimate sugar value-chain. With the dumping of raw sugar and sweetened candies, as well as illicitly traded soft drinks, increasing in popularity because of the higher cost of the legitimate product, the jobs at stake are sure to be a lot higher.

South Africa has tended to view the tobacco and alcohol industries as reliable sources of revenue flows since the implementation of the excise regime in 2002. Tax rates on most tobacco products and alcoholic beverages have increased above inflation annually. Fawu, as a progressive union, accept that these industries must pick up a reasonable share of the external costs attendant to their products. However, in the near future, excise will reach its inevitable point of diminishing returns if the government doesn't take serious measures to curb the growing illicit trade.

Soon enough, the government will realise less revenue from these industries despite raising duties owing to the rapid rise of non-duty-paying players growing their market share at the expense of duty-paying operators.

The rise of illicit tobacco, especially, poses a major threat to children as they can afford these toxic low-price brands. A drive or a walk into many township or rural areas will reveal that a lot of cigarettes sold in these areas are traded at about R15 to R20 per pack or as low as 50c for a loose cigarette. This is against the minimum collectable tax of R16.50 a pack, made up of VAT and excise duties due to government coffers. Because of this, the fiscus is estimated to have lost out on R24billion worth of revenue since 2010 given that, plausibly, the high taxes are fanning illicit trade.

Estimates put illicit tobacco at between 30% and 45% of the tobacco market.

Illegally dumped chicken constitutes about 33% to 35% of all chicken consumed and this means market share is bigger than the biggest poultry company, Astral Foods Chicken, and some of it may not be getting excise duty paid or quality-checked.

By not dealing with such illicit traders and illegal operators, these players will continue to cheat the fiscus with Sars enabling their illicit trade by inaction.

This threatens the sustainability of the commercially viable, tax-paying and quality standards-compliant players with the livelihoods of tens of thousands of people at risk at a time South Africa is struggling to tackle the 37.7% unemployment rate.

Sars's inaction also exacerbates the fiscal challenges the country faces, by allowing rogue elements to take over the formal, legally compliant economy.

We cannot allow lack of action by Sars any longer, hence Fawu and others marched to Sars offices to deliver the petition to call on Sars to collaborate with the SAPS in clamping down on illicit traders and tax evaders by enforcing existing laws on excise and tax.

These efforts by Sars and the SAPS could result in saving permanent and formal jobs, revenue flows to the fiscus and the nation's health. In the name of jobs, revenue and health it is a clarion call on Sars to be patriotic and positively respond!

I have previously written how billions of rand is leaving the country weekly via money laundering called “Hawala”. Most of it is from suspected organised crime. I have raised the matter with Sars and the SAPS and it’s time they acted. We now want to see action and fast!

* Yusuf Abramjee is a social and anti-crime activist. He also heads-up #MakeSASafe

** The views expressed here are not necessarily those of Independent Media.

Pretoria News