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Press Release

Hike in sin taxes equals even bigger rewards for criminals in illicit trade

Wednesday 23 February 2022 – FINANCE Minister Enoch Godongwana’s big hike in sin taxes means another big payday for criminals in illicit trade and more misery and suffering for legitimate businesses and hard-up South African consumers, Tax Justice SA (TJSA) warns today.

The excise increases of up to 6.5% will simply fuel the rampant shadow economy, less tax will be collected and thousands of honest livelihoods will be lost, the non-profit watchdog adds.

TJSA founder Yusuf Abramjee says: “Illicit trade has reached record levels over the last two years as a result of lockdown restrictions and their ongoing fallout. Criminals manufacturing and selling illicit alcohol and cigarettes have been making billions with apparent immunity.

“These crooks don’t pay taxes and aren’t about to start doing so. Instead, today’s excise increases, which are above the rate of inflation, will simply boost their profit margins and encourage hard-up consumers to buy their tax-evading products.”

In his maiden budget speech, Mr Godongwana acknowledged the importance of tackling illicit trade. He said that a search and seizure operation on Monday had uncovered yet another cache of illegal tobacco products, bringing the total value of illicit tobacco seized during the pandemic to over R350million. Three operators’ trading licences had been cancelled during the same period, one operator had been liquidated and eight cases had been referred for criminal prosecution.

Abramjee says: “This action against illicit trade is welcome, but it is long overdue and R350million is just a fraction of the sums being stolen from the South African people.

“We need to see more arrests, prosecutions and jail terms for the kingpins. Smuggling at our porous borders is rife and we must strengthen controls and checks against tax-evading contraband flooding into our country.

“Our nation already has one of the world’s biggest black markets in alcohol and tobacco. Mr Godongwana’s budget will empower the organised syndicates running these massively lucrative operations, while squeezing honest companies and workers who are struggling to make ends meet.

“If Ministers were serious about finding the money needed to uplift millions of struggling citizens, they would crack down on the illegal economy that loots our nation of R250 million every single day. That’s enough to cover the estimated cost of a basic income grant for all[1].

“Instead, the Government continues to reward the looters and today has sent out yet another clear signal that, in South Africa, crime really does pay.”