SARS’ Edward Kieswetter kisses R91 billion goodbye

A new report revealed that illicit trade is one of the biggest threats to stability and economic growth in South Africa, with tax losses nearing R100 billion per year.

This report, Transnational Alliance to Combat Illicit Trade (TRACIT) Organized Crime, Corruption, and Illicit Trade: Spotlight on South Africa, was published by Business Unity South Africa (BUSA).

It found South Africa faces challenges from illicit trade in alcohol, cigarettes, fishing, mining, counterfeit electronics, pharmaceuticals, food, and apparel.

“The magnitude of the losses is staggering and drains revenue and resources from an economy that could usefully benefit from increasing investment,” it said.

The South African Revenue Service (SARS) estimates that illicit trade costs the South African economy R100 billion annually.

BLSA estimated that the country loses around R250 million a day in tax revenue, equating to R91 billion annually.

Furthermore, the OECD estimates that South Africa is losing $3.5 billion to $5 billion yearly, or more than 1% of its GDP, to illicit financial flows. 

Philip Morris South Africa said illicit trade harms everyone except criminals. Money from illicit trade is also used to fund much more serious criminal activity.

To stem the negative impacts of illicit trade, the government of South Africa has recently taken important steps towards rooting out corruption.

It increased the number of successful cases against serious organised crime and recovered R8.2 billion in revenue from criminal and illicit economic activities in the 2021/2022 financial year.

The government also instituted a new Border Management Authority to strengthen efforts against importing illicit goods into South Africa.

However, it may not be enough to address the growing problem of illicit trade, especially after the growth in illegal alcohol and cigarette trade during the lockdown.

“Policymakers must ensure new regulatory measures do not create unintended consequences or incentivise consumers to choose illicit alternatives,” Philip Morris SA said.

“Excessive cigarette tax increases or tobacco bans create a free-for-all for illicit and criminal organisations.”