How tax money goes up in smoke

The illicit tobacco trade, especially the selling of cheap cigarettes, has cost SA the fiscus more than R8 billion in lost taxes in the last year alone, and more than R40 billion since 2010.

According to the Directorate for Priority Crime Investigation (Hawks), the largest share of the illicit cigarette market is occupied by those manufactured locally, with other brands smuggled from neighbouring Botswana, Mozambique and Zimbabwe.

“Klerksdorp is the top cluster in the province, which contributed 35.8% of illicit cases to North West. The top contributing station in Klerksdorp cluster is Wolmaransstad, with 80% contributed cases,” according to the Hawks.

The crime fighting unit said the borderline between North West and Botswana was not fully covered by the South African National Defence Force.

“The N4 is a national route that runs from Skilpadshek on the Botswana border past Rustenburg, Pretoria, Witbank and Nelspruit to Komatipoort on the Mozambique border,” the Hawks said.

The ports of entry were Swartkopfontein and Groblers bridge, where smugglers take advantage of the low border fence. Most of the illicit trade in tobacco involved the purchasing of manufactured products, so the origin of the finance could be from any source.

“These items are sold at way below market prices – R10 and R15 – a packet,” said the Hawks.

To address this problem, the government needs to strengthen border police, customs, the police’s canine unit and immigration officers. According to British American Tobacco it is easy to spot illegal cigarettes by their price.

For instance, a pack of 20 selling for below R19.16 should be suspicious because cigarette manufacturers must pay excise tax, calculated at R16.66 for a pack of 20 cigarettes post-budget 2019, as well as the requisite value-added tax (VAT).

Therefore, there is a minimum collectible tax of R19.16 in excise tax per pack of 20 cigarettes.

– gcinan@citizen.co.za

For more news your way, download The Citizen’s app for iOS and Android.