Illicit ciggies: R7-8bn tax lost
IN INFORMAL MARKET, FOUR OF EVERY 10 SOLD BELOW MINIMUM COLLECTIBLE TAX State capture was financed with illegal tobacco money, says #TakeBackTheTax spokesperson.
The market share of illegal cigarettes sold in South Africa jumped to 33.1% in 2018’s third quarter, according to Ipsos’ latest research report on the illicit tobacco trade.
South Africa is facing a massive onslaught from this trade, said Tobacco Institute of Southern Africa (Tisa) chair Francois van der Merwe.
Van der Merwe said tobacco was the biggest contributor to the fiscus globally and this incentivised traders to evade taxes levied on products.
When former SA Revenue Service (Sars) commissioner Tom Moyane ended the Operation Honey Badger initiative “illegal operators took the gap, and made billions”. If government understands the quantum of the loss to the fiscus, greater urgency may be applied to curtailing the illicit trade.
To measure the illicit market, Ipsos – commissioned by Tisa – settled on a conservative benchmark of the minimum collectible tax (MCT) of R17.85 per pack of 20, or 90 cents per cigarette (excludes costs).
Any selling price below this is considered illegal for the study’s purposes. Ipsos selected a representative sample of retail outlets (excluding mobile hawkers, taverns and shebeens), auditing each one twice, in June and September; 4 124 shops were audited twice.
The study showed that from June to September, illegal cigarette trade escalated alarmingly, with the market share of cigarettes selling at MTC increasing from 33.4% to 41.8%. RG, manufactured by Gold Leaf Tobacco, is now the biggest selling brand in southern Africa.
This makes South Africa the first country in the world to allow an illegal cigarette brand to become the top seller.” Brands retailing below MCT in September make up 33.1% (June: 26.8%) of South Africa’s sales – up 24% over three months.
In the informal market, four out of every 10 sticks sold are below MCT. The market share of sales below MCT has increased from 33.4% to 41.8%.
While MCT sales have arisen across South Africa, in Western
If Sars does not act soon, legal market may die