Tax Justice South Africa’s Yusuf Abramjee said as much as 70% to 80% of the cigarettes sold in South Africa are illicit, costing the country billions in tax revenue annually.
Abramjee told BizNewsTv that these illicit goods include smuggled cigarettes and cigarettes that are sold without paying the necessary taxes.
For example, the minimum collectable tax on a packet of 26 cigarettes is around R23. However, many smaller shops sell these packs for as little as R10.
Illicit cigarettes became a significant problem in South Africa during the Covid-19 lockdowns, which included a ban on cigarette sales.
This ban saw smuggled cigarettes flooding into the country, and illegal sales skyrocketed.
However, this did not end when the lockdowns lifted and is now costing the country billions each year in tax revenue.
Tax Justice SA estimates that more than R20 billion in tax revenue was lost in 2022 due to the illegal tobacco trade.
Abramjee’s comments come after several cigarette manufacturers recently failed in their urgent bid to interdict the South African Revenue Service (SARS) against installing closed circuit television (CCTV) cameras at their warehouses.
This ruling by the High Court will now allow SARS to install and monitor CCTV cameras in these manufacturers’ warehouses.
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.
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.
“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.”
The manufacturers argued that installing CCTV cameras in their warehouses is a breach of privacy.