FILE PHOTO - Cigarettes are seen during the manufacturing process in the British American Tobacco Cigarette Factory (BAT) in Bayreuth, southern Germany, April 30, 2014.
JOHANNESBURG – A new study says illegal cigarettes cost about R5 per pack.
The Ipsos report, released on Thursday for the Tobacco Institute of Southern Africa (Tisa) says the illegal cigarettes are available in more than 100,000 shops across South Africa.
According to the study, illicit cigarettes are impacting the South African Revenue Services (SARS).
The report also showed that after SARS ordered that investigations and the inspection of cigarette factories be stopped, the market prospered between 2014 and 2017.
SARS is losing about R7-billion due to the trade, with those behind it walking away with about R5-billion.
The research found out one company, in particular, Gold Leaf Tobacco Company accounts for 75 percent of the illegal trade in the country.
The study says thousands of jobs are at stake.
The study into the illegal cigarette trade is being released just one week after the former head of Enforcement at SARS, Gene Ravele, told the SARS Commission of inquiry that the decision to allow the illegal trade in cigarettes to flourish was “planned”.
“After I left [in 2015], there was no inspections at cigarette factories. Until today. When the Minister of Finance complains of the lack of compliance, it was planned,” said Ravele.
“The shortfall of government’s income this year is estimated at R50 billion. The Ipsos research shows that almost 8 billion cigarettes this year will be sold illegally, which translates to a more than R7 billion loss to the fiscus, or 14% of the shortfall. This is an outrage considering the country’s public finances and the fragile economic recovery,” said Tisa chairman, Francois van der Merwe.
“These are known manufacturers, licensed by SARS, and refusing to pay their taxes. The SARS could put an end to this within a month. As TISA, we are encouraged by the commitments made recently to Parliament by the SARS Acting Commissioner to take immediate steps to stop the illicit trade. As a short-term solution, SARS agents should be placed in all factories immediately to ensure all production is declared and duties paid, as was done before. We stand ready to assist and cooperate with SARS to rid the country of illicit operators,” he concluded.