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Press Release

Double blow for illicit tobacco traders as SARS sues importer for R19bn

Friday September 17 2021 – DEMANDS for an inquiry into the South African tobacco industry have grown even more urgent today following the revelation that the SA Revenue Service (SARS) has delivered TWO MASSIVE BLOWS to the rampant illicit cigarette trade.

In the space of a few hours that have rocked criminal manufacturers robbing our fiscus of billions in tax revenue, it emerged:

  •  SARS is seeking to recover at least R19 BILLION from an importer accused of smuggling tons of tobacco from Zimbabwe that disappeared into our underground economy
  •  A multi-agency team raided an unregistered cigarette factory in Gauteng which they are linking to a LICENSED MANUFACTURER GONE ROGUE

Tax Justice SA founder Yusuf Abramjee says: “These actions demonstrate that a new and determined SARS team appears to be finally getting to grips with one of the world’s largest illegal cigarette markets and this is good news for all South Africans.

“The breathtaking R19bn tax demand is double the revenue that SARS will actually collect in cigarette excise this year.

“It’s imperative that authorities get this rogue importer to name its paymasters and that a national inquiry is conducted into our tobacco trade.”

SARS is seeking to liquidate the import company, based at the Beitbridge border post, according to a News24 report.

It says Verbena Freight & Logistics Management imported 30 tons of tobacco from Zimbabwe between 2016 and 2019, but “steadfastly” refuses to say what happened to it.

“The respondent is evidently involved in the illicit trade in tobacco,” SARS employee Pule Mantso reportedly states in an affidavit lodged with the North Gauteng High Court in Pretoria in August.

SARS says it is owed “astronomical” sums, with Verbena liable for R18.8 billion in unpaid customs duty, plus R31 million in VAT, R73 million income tax and R477 000 in PAYE.

The tax agency has started to attach the group’s vehicles and containers, but this is still “dismally insufficient” when compared to the billions owed.

In the day’s other breakthrough, SARS reported it had led an intelligence-driven search-and-seizure operation on a tobacco factory in Gauteng.

“The plant is linked to a specific licensed cigarette manufacturer through the brand of the tobacco products found on the premises,” SARS said in a statement.

The multi-agency enforcement team also raided three shops in Fordsburg, seizing illicit tobacco products with an estimated value of R400 000.

Abramjee says: “Independent research has shown that criminal manufacturers are flooding South African shops with tax-evading cigarettes that rob the fiscus of more than a billion rand every month.

“Licensed cigarette companies insist they are operating within the law, yet their brands are sold across the nation at prices that show due taxes cannot have been paid.

“SARS and other law enforcement agencies need to regulate these companies properly to ensure they obey the rules and stop robbing South Africans of money that should be helping to fight the pandemic and rebuild our ailing economy.”