Sunday 14 July 2024 – DAMNING new research shows that chief suspects in the multi-billion-rand illicit cigarette trade are the very same manufacturers asking the courts to prevent the taxman monitoring their output.
Tellingly, most of the illicit cigarettes bought in the survey are brands belonging to manufacturers who are defying the law that mandates the South African Revenue Service (SARS) to install CCTV in their factories.
Yusuf Abramjee, founder of Tax Justice SA (TJSA), says: “These shocking figures explain why some cigarette makers might be so keen to keep SARS’ cameras out of their premises.
“The survey proves that a core of manufacturers has been flooding the market with tax-evading cigarettes for years. They’re stealing over R24 billion in vital excise revenue annually and want to carry on this industrial-scale looting without interference from the taxman.
“Our new Government now has the ideal opportunity to enforce the law, bring these criminals to justice and stamp out this economic sabotage once and for all.”
The Ipsos study of 4,600 stores is the latest in a series of mystery shopper surveys started in 2021. It found:
· Illicit cigarettes are on sale in almost two in every three stores nationwide (59.3%) – up from one in four (27%) in October 2022
· In our busiest provinces, illicit cigarettes are sold in three in every four stores – Western Cape (75.1%), Eastern Cape (74.4%), Gauteng (73.7%), Free State (73.1%), KwaZulu-Natal (67.3%)
· Cigarettes are selling for as little as R5 for a pack of 20 – less than one-fifth of the minimum collectible tax (MCT) of R25.05 (R21.78 excise plus R3.27 VAT)
· The illicit trade is most rife in the wholesale (82.9%) and informal (72.2%) sectors
The single manufacturer accounting for most illicit brands purchased in the survey was Gold Leaf Tobacco Company (GLTC), which operates out of Johannesburg and Harare. In March 2023, Al Jazeera’s Gold Mafia documentary exposed GLTC’s involvement in alleged smuggling and money-laundering on a massive scale.
Despite facing a R3 billion tax claim from SARS, Gold Leaf has apparently stepped up its part in the illegal price war, with 79% of its brands available for less than MCT in May 2024, compared to 28% in March 2021.
More than half of the illicit purchases in the survey were brands belonging to companies that won a High Court interdict in May against SARS’ 24/7 camera surveillance in cigarette warehouses.
These firms include Carnilinx, a principal member of the Fair Trade Independent Tobacco Association (FITA). More than 88% of Carnilinx brands purchased were sold at illicit prices.
Best Tobacco (75%), Afroberg (71%), United Tobacco (91%), Amalgamated Tobacco Manufacturers (50%), Folha (56%) and Protobac (100%) are also among the litigants seeking a court judgment to permanently set aside the CCTV rule, as are newcomers to the market, Bozza (34%) and Harrison (52%).
Abramjee said: “FITA should be forced to explain to the High Court how their members’ brands have been selling at tax-evading prices for years. Is this what they are trying to hide from the cameras?
“This unprecedented criminality is bleeding billions of rand from our fiscus and the ringleaders are stealing from our schools, our hospitals, from our very future. The evidence is clear – now it’s time for the Government to finally stop these looters in their tracks.
“The message is simple: install SARS cameras, or lose your licence to make cigarettes.
“The courts must force these companies to obey the law, enforcement authorities must crack down on their wrongdoing and the taxman must recoup the stolen revenue that’s meant to build a better future for all.
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