South Africa Loses Billions in Taxes To Illicit Cigarettes

July 6, 2018 Taxation in South Africa

Illicit cigarettes South AfricaJOHANNESBURG – Cigarette manufacturers in South Africa are fuelling the market for illegal tobacco, where a pack of cigarettes costs less than the tax due on their sale.

According to a new report completed and released by the South African Revenue Service (SARS), the national government is losing billions each year due to the prevalence of illicit cigarette sales. ‘

Approximately three-quarters of all informal shops surveyed across the country appeared to be selling illicit cigarettes.

Currently, a pack of cigarettes in South Africa would carry a minimum tax obligation of SAR 17.85 per pack.

However, the illicit cigarettes were priced lower than the tax, in some cases being as cheap as SAR 5 per pack.

It is impossible that the full tax obligation can be met on the sale of cigarettes that cost less than the actual tax obligation.

The study suggested that at least part of the cause behind the illicit trade in cigarettes is the manufacturers themselves, as they explicitly avoid official sales channels in order to continue selling cigarettes without incurring any tax obligations.

The illicit sale of cigarettes in South Africa is estimated to cost the government as much as SAR 7 billion each year.

The extent of illicit tobacco trade in South Africa has risen suddenly over the last few years, following the closure of an inquiry into illegal tobacco trade in 2014.