Big blow for illegal cigarettes in South Africa

A new ruling by the North Gauteng High Court against illicit tobacco traders could make a significant impact on the South African Revenue Service’s (SARS) tax collection efforts in 2024.

This is the view of Tax Justice SA’s Yusuf Abramjee, who told Cape Talk that the organisation welcomes what it considers “a vital legal breakthrough against illicit tobacco traders stealing billions of rand from South Africa”. 

Abramjee’s comments come after several cigarette manufacturers recently failed in their urgent bid to interdict SARS against installing closed circuit television (CCTV) cameras at their warehouses.

These cameras will allow the revenue service to monitor these warehouses and the volumes they produce.

Abramjee said this surveillance will go a long way in cutting down and stopping the illicit trade and manufacturing of these goods in the factories.

Large tobacco manufacturers like British American Tobacco and Gold Leaf Tobacco have had these cameras installed for years, but other manufacturers have failed to do so.

This ruling by the High Court will now allow SARS to install and monitor CCTV cameras in these manufacturers’ warehouses. 

One of the organisations seeking an interdict against this ruling was the Fair Trade Independent Tobacco Association (FITA).

Abramjee said FITA represents around 80% of the smaller manufacturers known for selling popular brands on the illicit market.

He said this ruling is a legal breakthrough because the country’s illicit cigarette trade is growing by the day, with billions of rands lost annually in revenue collection.

“They are stealing billions of rands annually, and we’re urging the authorities to enforce the law to prevent the industrial-scale looting,” he said.

Tax Justice SA estimates that more than R20 billion in tax revenue was lost in 2022 due to the illegal tobacco trade.

This is often because some smaller retailers sell cigarettes for far less than the minimum collectable tax on a pack of cigarettes, and these retailers do not pay taxes on these products. 

“We know that the goods are taken out of these factories at night because they don’t want to declare these products,” Abramjee said.

“We know the invoices do not reflect the actual quantities and the values, and we know that with many of these cheap cigarette brands, the taxes are simply not paid.”

“So in these factories, it’s important to monitor the production to have the volumes recorded.”

Abramjee believes the installation of CCTV cameras will reveal how cigarettes are being smuggled and manufactured illegally.

“It will bring an end to the large-scale smuggling that’s taking place. The culprits will be brought to book,” he said.

“If they’ve got nothing to hide, they must simply allow these cameras to be installed.”