SARS cracks the whip – 1,230 cases and R80 billion in assessments

The South African Revenue Service (SARS) has cracked down on illicit trade in the country. A dedicated team has handled 1,230 cases and raised over R80 billion in tax assessments. 

Illicit trade in South Africa has flourished in the past five years, with the country’s pandemic-era lockdowns significantly boosting the sector. 

Trade in illicit goods ranges from cigarettes and alcohol to illegally imported cars and goods that are legally produced but violate intellectual property rights. 

SARS has poured resources into its fight against the illicit cigarette trade, which is by far the largest. Commissioner Edward Kieswetter estimates its impact on the fiscus to be between R15 billion and R18 billion annually. 

He noted that SARS has always been battling against the illicit trade of goods in South Africa, as traders in this sector can offer products at significantly lower prices. 

In a country with a rising cost of living and a stagnant economy, many ordinary people turn to the illicit trade to save money. These products are often cheaper because they are unsafe and not taxed. 

“Everyone who purchases these products is complicit in the crime. They are effectively stealing money from the poor,” Kieswetter said. 

The commissioner also pointed out that SARS was winning this battle until the late 2010s when the era of state capture decimated its capability and pandemic-era lockdowns boosted illicit trade. 

The Transnational Alliance to Combat Illicit Trade (TRACIT) said the country’s strict lockdowns that banned the legal sale of alcohol and tobacco products exacerbated South Africa’s illicit trade problem. 

“South Africa’s nationwide ban on domestic sales of alcohol production and transportation during the pandemic had a significant effect on consumption patterns and provided a massive boost to organised criminal involvement in the production and supply of illicit alcohol,” TRACIT said. 

Illicit alcohol products come in a variety of forms, making it difficult for SARS and other authorities to tackle the growing trade.

Goods produced legally but sold without the collection of excise taxes and VAT are considered illicit contraband. Thus, many of the products sold in the illicit market are produced locally and legally but are then ‘bootlegged’ and sold very cheaply, without any tax levied. 

Other products may be produced illegally, have fake labels and trademarks, violate intellectual property rights, and not meet health regulations. 

Such products are very rare, making up around 2% of the illegal market, according to TRACIT. 

The crackdown 

Kieswetter, in an interview with eNCA, outlined the tax authority’s efforts to clamp down on the burgeoning illicit trade. 

“Just the illicit tobacco trade, according to estimates from academics and SARS, place the loss to the fiscus at between R15 billion and R18 billion,” he said. 

Illicit trade is estimated to cost South Africa R100 billion a year in lost tax revenue, with the trade in alcohol contributing R11 billion to that loss and illegally imported second-hand cars R8 billion. 

In response, Kieswetter has set up a dedicated team within SARS to focus on the illicit trade, clamp down on major players and pursue the ill-gotten profits from this business. 

He said the team has already dealt with around 1,230 cases of illicit trade and raised almost R80 billion in tax assessments, of which R36 billion has already been collected. 

The team has raised R20 billion in assessments from the illicit tobacco trade alone, with around 100 cases currently underway and R4 billion already collected. 

Kieswetter called on other law enforcement agencies to help SARS, saying that many of the illicit trade businesses engage in organised crime and operate across borders. 

Collaborative efforts have proven highly effective in the past, with SARS’ National Customs Enforcement Team joining forces with the police and defence force to intercept truckloads of illicit cigarettes earlier this year.

In June, SARS’ Customs Division began to destroy illicit and smuggled cigarettes, valued at R43 million, at the Beitbridge border post.

The illicit and smuggled cigarettes were seized in multi-agency operations and dedicated and intelligence-driven operations as part of the Customs Division’s tobacco strategy.

“This is part of ongoing efforts to enhance the effectiveness of customs in combating illicit trade, particularly in tobacco and cigarette,” SARS said.

“We will use all information gathered by enforcement agencies to follow up and prosecute those who are involved in these syndicated crimes,” Kieswetter said.

“All those who are involved, irrespective of their nationality, will face the full might of the law. We will continue to carry out our enforcement work without fear, favour or prejudice.”