BIG TOBACCO’S LYING LIARS
The Tobacco Institute bemoans how the implosion of Sars opened the door for illicit tobacco. The truth is, its own members were tax cheats
Last week, you might have seen one of the more self-serving press conferences, in which the Tobacco Institute of SA (Tisa) railed against the vast volumes of illicit tobacco flooding through the market unchecked, thanks to the implosion at the SA Revenue Service (Sars).
A study by Ipsos put the amount lost to the fiscus from illicit tobacco at R7bn a year. Francois van der Merwe, the bombastic chair of Tisa, described it as “an outrage”, saying “there are known manufacturers, licensed by Sars, refusing to pay their taxes”.
What Van der Merwe didn’t cop to, obviously, was his own members’ culpability in robbing the fiscus blind of revenue owed from tobacco.
Instead, he spoke of how Tisa used to work with Sars on cracking down on illicit tobacco until 2014 but “tobacco money played a role in state capture, so no wonder our relationship was terminated”.
Van der Merwe’s subtext: it is the illicit tobacco players, like Carnilinx (whose supremo, Adriano Mazzotti, funded Julius Malema) who are the bad guys, harming the law-abiding folk at such august institutions as British American Tobacco (BAT)*.
Which, of course, is bogus.
A gripping new book by Johann van Loggerenberg, the man who led the Sars investigation into the tobacco industry before he was ousted by Tom Moyane, reveals how there are no angels here — least of all
Tisa, the industry body for big tobacco in SA, which is overwhelmingly dominated by BAT.
In his book Death and Taxes, Van Loggerenberg tells the stories behind his biggest cases — including operation “Honey Badger”, which uncovered 15 cases of criminal conduct in the tobacco industry.
Here’s the thing: BAT and Tisa were implicated in this shady behaviour too. And yet they were working alongside the “task force” set up to combat illicit tobacco, which consisted of officials from the Hawks, crime intelligence, the National Prosecuting Authority and the State Security Agency.
This relationship raised questions. As the Mail & Guardian wrote in 2014: “Controversially, the structure gives BAT access to state intelligence and the ability to influence who the state targets among its direct competitors.” In other words, BAT had captured the lawenforcement agencies. Yet it is this task force that Van der Merwe says was eviscerated by state capture.
The truth is, given the questions over the task force, Van Loggerenberg had already instructed his team not to work with them, long before Moyane gutted Sars. In Van Loggerenberg’s book, he says that the task force was implicated in “corruption, racketeering, running interference in Sars cases and money-laundering”.
Now, the problem with looking at the Ipsos study in isolation is that illicit tobacco is just one of three ways in which the fiscus loses out on tobacco taxes. The second drain comes from tax-dodging strategies used by big tobacco, and the third is the amount lost in the “informal trade”, through VAT and payroll taxes.
And when it comes to shafting the taxman, BAT is one of the worst. Its recent annual report lists a “contingent liability” for a dispute it has with Sars dating back to 2011, when the tax authority challenged the “debt financing” of BAT SA between 2006 and 2010.
Essentially, this implies that Sars must have believed BAT put in place artificial structures designed to shift profits offshore and reduce the tax it pays.
The upshot: Sars hit BAT with a tax bill for R2.01bn for “tax and interest” it should have paid. So when
BAT, through its mouthpiece, bemoans the injustice of those who “refuse to pay their tax”, this is pretty rich.
It gets worse if you consider BAT’S own role in dismantling Sars. The tobacco giant, infamously, paid lawyer Belinda Walter £30,500 to “spy” on its rivals. Not long after, Walter complained to Sars that Van Loggerenberg (with whom she’d had an ill-fated romantic tryst) was leaking confidential taxpayer information. This gave Moyane a pretext to axe him.
Remarkably, Walter said in court papers that the “tobacco task team” (including Tisa) agreed to “assist me with the complaints against Van Loggerenberg” — but only if she withdrew a £5m claim against BAT.
Predictably, once Van Loggerenberg was sidelined, the tobacco investigation fell apart. As former Sars official Gene Ravele told the Nugent inquiry, after 2015 there were “no inspections at cigarette factories”.
The fact is, the Sars implosion suited BAT down to the ground. Do you imagine, if Van Loggerenberg were still there today, that the company’s R2bn tax claim would still be unresolved? Tisa’s spin, unfortunately, is short on introspection and long on hypocrisy.
The tobacco giant, infamously, paid lawyer Belinda Walter £30,500 to ‘spy’ on its rivals