Reports released in November 2018 indicate that 1 of 3 cigarettes sold in South Africa is illegal. The cost of illegal cigarettes is about R50-60 per carton while legal cigarettes are sold locally in South Africa for R250 per carton. Consumption of illegal tobacco keeps increasing due to the higher selling price of legal cigarettes.
The survey estimates that up to 100 000 shops freely sell illicit cigarette brands nationally. The South African Revenue Services is losing billions of Rands in taxes due to this trade of illegal cigarettes. The South African Minister of Finance, Tito Mboweni, announced an increase of R1.14 on a packet of cigarettes and such an increase will no doubt have a detrimental impact on the South African Tobacco industry. Smokers are now turning to illegal cigarettes due to the constant increase in sin tax.
Mboweni also announced that they are in process of reinstituting the Illicit Economy Unit, which was previously dissolved by the former SARS commissioner Tom Moyane. The Unit will focus on illicit Tobacco trade. With this move, SARS is aiming at regaining the confidence of investors in Tobacco industry.
This is good news for those who are trading legally in the industry. This will also benefit the South Africa economy by ensuring all trade is held accountable to the tax man. Tobacco plays a big role in the South African economy and the Illicit Economy Unit will aim to regain billions of Rands lost in taxes due to the sale of illegal tobacco.
Author:
Alex Mahundla
Process Assistant
