Taxpayers lose R24 billion every year due to illegal cigarettes
British American Tobacco Sub-Saharan Africa is raising concerns about the government’s commitment to address the illicit tobacco trade.
Picture: © koloj/123rf.com
Motheo Khoaripe is joined by Johnny Moloto of British American Tobacco Sub-Saharan Africa.
The leading tobacco manufacturer in South Africa is urging the National Treasury to help fund the South African Revenue Service (Sars)'s efforts to sniff out the kingpins in the illicit tobacco trade.
An Ipsos survey commissioned by British American Tobacco Sub-Saharan Africa (BATSA) revealed that almost 60% of stores sampled are selling counterfeit tobacco products.
Some stores were selling packets of cigarettes for as little as R5.
Earlier this year, BATSA announced it was being forced to scale down its operations due to the impact of illicit products on its sales.
Moloto says the problem began back in 2010.
"At that stage it was as small as 26%, but quite significant in terms of what the fiscus was losing."
- Johnny Moloto, BAT Sub-Saharan Africa
Moloto says things started to look up with the appointment of Edward Kieswetter as commissioner of SARS in 2019, but then the industry was dealt a blow by the Covid-19 pandemic.
"It allowed for the illicit player to develop supply chain... and they just became very prevelant and this is where we stand now."
- Johnny Moloto, BAT Sub-Saharan Africa
"In fact, it was a government intervention that actually inflamed the situtation."
- Johnny Moloto, BAT Sub-Saharan Africa
The study also revealed there are constant attempts to enter the illicit tobacco trade by 'new kids on the block', which then fuels 'intense competition at the bottom end of the market'.
"All of these manufacturers are known to the revenue authorities because they license them."
- Johnny Moloto, BAT Sub-Saharan Africa
Moloto says nothing justifies licensing new manufacturers in a sector already ravaged by high
levels of non-compliance without conducting proper due diligence.
"If a product sells below R25.05 - the current excise - they definitely could not have paid tax... it's a huge problem."
- Johnny Moloto, BAT Sub-Saharan Africa
BATSA says the loss in tax revenue from the illegal tobacco trade is R24 billion annually.
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