Estimated reading time: 4 minutes
Following a damning investigation by Tax Justice South Africa (TJSA), the war on the illicit cigarette trade continues. Such is the impact of the organisation’s investigation, TJSA has delivered a full confidential report of its investigation featuring hours of undercover footage, to police, the South African Revenue Service (SARS) and the Departments of Health and Trade.
The sale of illicit cigarettes boomed during the 5-month blanket ban on the sale of tobacco products in 2020. However, it appears the market for these illegal cigarettes has not diminished in the slightest.
TJSA’s operation saw its undercover team visiting 40 mainstream retail and wholesale outlets in Durban, Johannesburg, Cape Town and Pretoria. Their findings showcased just how the black market has flourished.
The organisation states that its investigation proves indisputably and without doubt, that illicit cigarettes are being openly sold at mainstream outlets throughout South Africa. This, in turn, results in billions of rand in unpaid taxes being stolen by criminals driving this trade, TJSA stresses.
Moreover, the situation has apparently reached a point where TJSA estimates two in every three cigarettes sold in SA, is now illicit.
With the TJSA looking to authorities for resolution, the SA Tobacco Transformation Alliance (SATTA) is also calling for urgent action from leaders in the wake of the report.
Concerningly SATTA affirms, vendors appear to have no fear of reprisals from law enforcement, and many seem not to know or care that their prices are below the minimum tax threshold of R20.01 per pack.
SATTA spokesperson Zacharia Motsumi highlights, “This disturbing report is graphic proof that illicit cigarette manufacturers have taken over the market. They were empowered by the lockdown sales ban and their networks are now firmly entrenched in the South African cigarette market.”
In addition, he stresses the individuals involved in the trade are a direct threat to the livelihoods of those in the legal industry, draining billions of rand from the fiscus at a time when that money is desperately needed. “We recognise that the law enforcement agencies are stretched, and that SARS’ capacity has also been weakened, but this has to become a national priority.”
SATTA is now calling for more vigorous enforcement of the trading laws and the introduction of a minimum price level (MPL) for cigarettes. “The MPL would enable law enforcement agencies, and consumers, to recognise illegal cigarettes purely by how cheap they are – which is the most obvious sign that excise duties are not being paid,” Motsumi explains.
Furthermore, Motsumi believes an MPL strategy would need to be supported by a deterrent criminal penalty regime, including hefty fines and jail time for traders who contravene the law.
He states, “The lives of decent, hard-working South Africans are at risk from the booming illicit cigarette trade and it is the responsibility of our lawmakers to crack down on this criminal enterprise today.”
While SATTA is calling for action, the Fair-trade Independent Tobacco Association (FITA) has slammed TJSA’s report. “We do not wish to give any legitimacy to Tax Justice South Africa and its so-called investigation, the concocted findings of which must be rejected with contempt.”
FITA’s statement does not end there, stressing the association is not surprised by the opportunistic and choreographed comments issued from organisations after TJSA’s findings, organisations which they claim appear to be nothing more than lapdogs of Big Tobacco.
TJSA’s report claimed common brands in the illicit trade included products from FITA’s members.
The association responded by saying it is essential to point out that the cigarette brands mentioned in the investigation do not belong to its current membership. “We, therefore, suggest that any queries incidental thereto, be directed at the correct parties.”
With all this controversy circulating the tobacco industry, what are your thoughts on the situation? Share your views with us in the comment section below.