The Rising Cost of Illicit Tobacco Trade in South Africa

South Africa is facing a rampant increase in illicit cigarette sales, with severe economic repercussions as the country loses approximately R27 billion each year to the underground market. The gravity of the situation was highlighted in a recent interview conducted by Ray White with the founder of Tax Justice South Africa, Yusuf Abramjee.

According to Abramjee, the illicit tobacco trade is not only a drain on the country’s fiscus but also raises serious public health concerns due to the potential lower quality and higher health risks posed by these unregulated products.

The minimum collectable tax on a pack of 20 cigarettes in South Africa is set at R23, a benchmark pricing revealing the sheer volume of tax evasion when illicit packs are sold significantly below this minimum. Often, these packs are easily accessible for as little as R25 or less, signifying a loss of rightful tax to the government.

Abramjee stressed that the problem is escalating daily, with criminal figures behind this trade amassing wealth with every minute that passes. The South African Revenue Service (SARS) has implemented a directive requiring all cigarette factories to install CCTV cameras in a bid to clamp down on the circulation of illicit cigarettes.

However, this measure has been met with resistance from a number of tobacco brands that sought legal interjection to prevent the enforcement of the SARS directive. The courts ultimately ruled in favor of SARS, expressing that the tax authority was within its rights to implement such security measures.

The fight against illicit trade is also casting a spotlight on the audacity of criminal networks that undermine state authority and rob the country of essential fiscal revenue. The lost billions could otherwise fund critical services and development projects.

Addressing this issue effectively requires committed action from government agencies, coherent policy enforcement, and support from the public in rejecting illicit products. The battle against the illegal cigarette trade necessitates a multi-faceted approach including tighter border controls, sterner penalties for offenders, and public education on the negative implications of supporting the illicit market.

As the government clamps down on illicit trade, South Africans must realize that every illicit cigarette pack purchased not only contributes to the growing power of criminal syndicates but also deprives the country of essential tax revenue that could improve the collective wellbeing.