SA tobacco manufacturers fighting SARS surveillance rule in warehouses
The implementation of a new rule to install CCTV equipment in tobacco manufacturing warehouses has been met with resistance by manufacturers in South Africa.
This is after the South African Revenue Services (SARS) decided to implement the new rule that was introduced under the Customs and Excise Act in 2022 compelling warehouses used for manufacturing or storing tobacco products to be placed under constant, continuous, and permanent surveillance.
Manufacturers have decided to take SARS to court to prevent it from implementing the new rule.
SARS stated that installing CCTV equipment in these warehouses is a way of monitoring production and rein in galloping tax leakage which is reckoned to cost the fiscus upwards of E20 billion each year.
Surveillance
The new rules require constant surveillance of manufacturers and imported tobacco products and must provide coverage of all chains of production including packaging, dispatch, and loading areas.
They also require SARS agents to be given access to warehouses and production facilities to inspect, repair, or replace CCTV equipment and footage.
In its court application, the FairTrade Independent Tobacco Association (FITA) representing some producers moved an application to the Pretoria High Court to interdict SARS from implementing the new warehouse camera rule because it violates the constitutional right to privacy.
One of FITA’s prayers is for the court to review and set aside the rule of amendment, further arguing that the rules are unprecedented governmental interventions and a grave, unjustified violation of the right to privacy and property.
The association stated that it is the first time to its knowledge that
SARS required taxpayers to be placed under constant daily surveillance.
“It goes on to say that the CCTV requirement is irrational, capricious, and arbitrary, is clearly against the law, and violates constitutional rights to privacy and arbitrary deprivation of property. Fita wants the new rules reviewed and set aside under the Promotion of Access to Justice Act,” submitted the association.
FITA has further requested the court to compel SARS to furnish it with documents and rationable leading up to the rule amendment, which SARS says has already been provided.
There is also concern that intellectual property may be compromised by allowing SARS cameras into factories. The association told the court that this type of surveillance is only used in one or two authoritarian states.
Furthermore, it argued that there is no provision in the Act empowering SARS to make rules that subject manufacturers to constant and continuous surveillance.
Inspection
“Introducing a wholly new character of inspection and search from temporary and time-to-time visits based upon a reasonable suspicion of non-compliance to a new regime of constant, continuous and permanent surveillance is not to regulate but to legislate,” submitted FITA.
The association also argued that the Act allows for nothing beyond periodic regulatory inspections in the warehouses, further arguing that it also does not give the SARS Commissioner the power to create crimes as these new rules attempt to do.
It argued that penalties such as imprisonment or fines for non-compliance are part of those rules and only parliament can ‘create crimes’.
FITA also stated that its members are as concerned as anyone about the tax leakage of the illicit trade, but object to being singled out for this kind of intrusive surveillance, while other sectors known for tax evasion such as clothing, gold, and fuel are not. It further brought it to the court’s attention that SARS was considering employing this technology, but abandoned it for unknown reasons, stating that the opposition is based on that the association cannot allow constitution to the be bypassed when there are better solutions available.
FITA further stated that it does not believe that 24-hour surveillance will be effective while illegal cigarettes continue to pour across the border.
Remedies
“SARS has many other remedies at its disposal such as the stationing of permanent officials at our member factories, and the installation of production counters on our machinery, all of which we have never objected to,” submitted FITA.
The case to interdict SARS from implementing the new rules will be heard on April 15, 2024, while the application to review and set aside the new rules will be heard later this year.
According to the Organised Crime Index, illicit trade in tobacco remains a concern globally even for countries used as transit corridors.
Eswatini is one of those countries that continue to transit corridors for the smuggling of cigarettes and tobacco that are falsely declared and transported in container and commercial vehicles or hidden in passenger vehicles.
The World Bank reported that illicit trade in tobacco products undermines global tobacco prevention and control interventions, particularly tax policy.
The Bank stated that contrary to tobacco industry arguments, raising tobacco taxes is not the primary cause of illicit trade.
“Accumulated evidence indicates that the illicit cigarette market is relatively larger in countries with low taxes and prices, while relatively smaller in countries with higher cigarette taxes and prices. Non-price factors such as governance status, weak regulatory framework, and the availability of informal distribution networks appear to be far more important factors,” the World Bank said. concerning tobacco