SARS fight against illicit cigarette trade backed by industry players

Tighter controls by SARS to fight illicit trade of cigarettes has been welcomed by organisations within the industry.

SARS on Tuesday issued a statement indicating it will be making use of advanced technology to track and trace cigarettes from manufacturing plants to points of sale. SARS issued a tender for “production management” of the track-and-trace solution.

Both the Tobacco Institute of Southern Africa and the Fair-Trade Independent Tobacco Association, which represent various players in the industry, have welcomed the move by SARS.

“TISA is fully supportive of any measure that intends to achieve tighter controls on tobacco manufacturers and importers to ensure all volumes manufactured locally or imported are declared to SARS, and all taxes paid,” Tisa chairperson Francois van der Merwe said.

“The current honesty-based system of declaring volumes and payment of duties has become completely inefficient,” he added.

Van der Merwe explained that SARS is losing billions owed to the fiscus, because manufacturers are not declaring all the volumes produced to evade taxes. “Tamper proof counters installed on cigarette making machines should form part of the process, to address the biggest problem in SA, which is volumes not being declared to SARS,” Van der Merwe suggested.

According to van der Merwe SARS will hold a briefing session on May 10 to provide more detail on the project and what it is expected to achieve.

Sinen Mguni chairperson of FITA, which represents smaller manufacturers, commented that when choosing bids, SARS has the ability to act independently to fight illicit trade and “does not need” nor should it accept assistance from the tobacco industry – specifically some big players who have been instrumental in enabling illicit flows.

“Our position has always been that we, as an organisation, fully support any effort by the state and affected industry stakeholders to curb smuggling and the illicit trade in cigarettes,” Mguni said.

FITA is party to a commitment with SARS and TISA to fight illicit cigarette trade, agreed to on August 15, 2018. “This was done whilst maintaining our position that smuggling, although a  problem, pales in comparison to the vast amounts of profits which leave our shores through aggressive tax avoidance schemes such as base erosion and profit shifting employed by some in our industry,” Mguni said.

Mguni highlighted that the issue of tax evasion goes far beyond illicit trade. “Compliance should never be limited to one aspect when the picture is far greater than just the illicit trade,” he explained.

Previously Sunday Times reported that SARS was pursuing British American Tobacco, a member of TISA, for R143m due to fraud and tax evasion.

BATSA in turn has said in a statement that the revenue service owes it R30m. Van der Merwe has told Fin24 all its members are compliant with tax law, Fin24 reported.