Time to collect cigarette company dues
FOR ALMOST FOUR years, cigarette companies have had a tax holiday.
Of all the industries one could think of that should be given a pass on their tax obligations, the tobacco industry would be the last.
It is just one of the many scandals of the Zuma years which we are now uncovering through the State Capture and Sars inquiries.
In June, Gene Ravele, former head of customs and tax enforcement at Sars, told the Nugent Commission of Inquiry into Sars that he was instructed by Jonas Makwakwa, right-hand man to suspended commissioner Tom Moyane to stop inspecting cigarette factories. That was in 2015.
Ravele was hounded out of Sars shortly afterwards, and had been harassed by a trumped-up criminal prosecution until this month, when all charges were dropped due to a lack of any concrete evidence.
While the innocent Ravele and many other diligent law enforcement officers were being unjustly traumatised by corrupted institutions of state, rogue cigarette companies were building massive businesses and raking in billions of rand, courtesy of an enforcement holiday provided by the former Sars administration.
In July and August, we were able to scratch the surface of the cost of this corruption.
First, the Tobacco Institute of Southern Africa (Tisa) released a research report from Ipsos which exposed the rampant growth of illegal cigarettes selling for a fraction of the tax owed to Sars on each pack.
Sars is owed R17.85 on every pack of 20 cigarettes sold in this country. Yet, there is a single brand selling for about R10 per pack which has become the second fastest-selling brand in the country, and we understand is now on track to be South Africa’s number 1 cigarette brand by the end of this year.
It is possible to buy 20 cigarettes for just R5 per pack – a mere 25c per cigarette, cheaper than anywhere else in the world.
According to Ipsos, these illegal cigarettes are available to buy and are openly displayed in over 100 000 shops in the country, in three out of every four shops in the informal sector. No tax is paid on these cigarettes.
According to Ipsos, they are robbing the South African fiscus of at least R7 billion every year.
The Treasury has submitted to both Parliament and the inquiry that their tobacco tax revenues are collapsing.
In August, Chris Axelson, Head of Tax Policy at Treasury, testified to the Sars Commission of Inquiry that Treasury’s tobacco tax collection was down 20% in the past year alone.
It is clear: some cigarette companies are paying their taxes and some are not. That is unacceptable.
This is why I’ve joined the #TakeBackTheTax campaign, launched by Tisa, as its official spokesperson.
Tisa’s campaign simply calls on Sars to collect all taxes owed by all operators in the tobacco industry.
But there’s hope. Under Acting Commissioner Mark Kingon, Sars has already announced the establishment of a new Illicit Economy Team.
“The holiday is over” according to Kingon, and we should all applaud that. The #TakeBackTheTax campaign is about rallying the public to support Sars and to say to them: “Get a move on!”