COSATU urges SARS not to buckle under pressure from industry on its efforts to crack down on the illicit tobacco trade
8 April 2024
The Congress of South African Trade Unions (COSATU) urges the South African Revenue Service (SARS) not to buckle to pressure from some industry players on its efforts to crack down on the illicit tobacco trade.
We are disappointed, but not surprised that the Fair-Trade Independent Tobacco Association is threatening to take SARS to court to block its efforts to tackle the rapidly exploding illicit trade in tobacco. The Association says its is aggrieved that SARS intends to place cameras in manufacturing plants and warehouses to track and trace tobacco products and ensure that legitimate products do not find their way into the illicit trade. This vehement opposition to transparency and accountability with regards to whether its products enter the illicit trade is deafening as is the silence of some politicians notorious for receiving funding for illicit tobacco smugglers.
South Africa has seen an astronomical explosion in the trade of illicit tobacco over the past few years. Independent research by the University of Cape Town amongst others, including the tobacco industry itself, estimates the illicit trade has grown from a meagre 5% of tobacco products in 2009 to a massive 60% in 2022. The loss of state revenue due to this increase is estimated at over R110 billion for this period and currently valued at R20 billion annually.
All sober persons familiar with medical science appreciate that tobacco is not only bad for the health of consumers and persons within their radius but also highly addictive, particularly for young people. It has sent millions to their grave prematurely, deprived families of breadwinners and loved ones, and bled the economy and fiscus. We appreciate it is virtually impossible to simply declare a product illegal from a perspective of enforcement and there are legitimate jobs and industries built along the tobacco value chain.
We have supported the progressive legislation enacted by government led by the African National Congress since 1994 that has sought in a progressive and sustainable manner to regulate the tobacco industry and deter consumption where possible. A critical anchor of this policy is the sin tax on tobacco consumption.
The danger in the explosion of the illicit tobacco trade is that cigarettes sold illegally are a fraction of the cost of products sold legally as their sellers withhold paying the taxes due on them. This has seen tobacco prices plummet and thousands more who otherwise would not smoke or smoke less, take up this habit, especially young people.
The rapid growth in illicit tobacco will not only see a rise in lung cancer and related illnesses, an impact on the long-term health of its consumers, but also deprive the state of billions of Rands needed to fund public services such as clinics and hospitals. It will collapse legitimate businesses who pay their taxes and obey the law. Their jobs of workers from legal tobacco farms and manufacturers will be at risk.
SARS must not bow to such obstacles from traders, who seem more concerned about obscure legal claims than tackling an illicit industry.
Whilst supporting SARS and government’s efforts, it is critical they work with the legal industry to install additional mechanisms to clamp down on the illicit trade, e.g. track and tracking features on cigarette packs and delivery trucks. Law enforcement need to play their role and arrest those retailers who openly sell illicit products. The 7th Parliament too must fast track the Tobacco Products and Electronic Delivery Systems Control Bill. These are important to ensuring the illegal trade does not collapse government’s health programmes and legitimate businesses who comply with the law.
Issued by Matthew Parks, Acting National Spokesperson & Parliamentary Coordinator, 8 April 2024
