Photo by: Bloomberg
Illegal cigarette manufacturing is increasingly impacting on legitimate tobacco farmers, processors and cigarette manufacturers, says the South Africa Tobacco Transformation Alliance (Satta).
The extent of this damage has been exposed in a research report into illegal cigarette trading by market research agency Ipsos, showing that daily gains are being made by the criminal networks driving the illegal sector, the organisation states.
It points out that the research finds that nearly half of South Africa’s shops now stock illegal cigarettes and five times as many petrol stations now sell illegal cigarettes, compared with a survey conducted in February.
What is particularly concerning to Satta is that some retail outlets are selling cigarettes for as little as R6 a pack, compared with the minimal collectible tax rate of R21.60.
The alliance believes the only way cigarettes can be sold so cheaply is by not paying tax and thereby committing a crime at the expense of the South African Revenue Service (Sars) and the legal value chain.
Although Satta welcomes recent action taken against some illicit tobacco traders, it laments that much more needs to be done.
The alliance believes Sars ought to be more concerned and focused on action against the illegal activity, but yet the illicit tobacco sector siphons millions of rands a day out of the system, it argues.
“How does Sars justify this situation to tobacco farmers, including black subsistence farmers – who pay their taxes and comply with the law, but are slowly going under, and factory workers who have lost their jobs?”
What particularly irks Satta is the fact that the identities of the illicit tobacco dealers are no mystery – one can look at the brands which are increasing their presence and selling below the minimal collectible tax rate.
Satta is demanding action from the revenue service and broader government to perhaps institute a commission of inquiry into the illicit cigarette trade, or introduce a comprehensive track-and-trace system.
This call is echoed by the Black Tobacco Farmers Association, which in a statement on July 9 said the industry would have to take action if Sars does not urgently deal with the problem.