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Illegal trade explosion that’s costing SA billions blamed to Ministers

Government policy has fuelled a massive explosion in South Africa’s illicit cigarette trade that is laid bare in a damning new report published on Monday. Three quarters of retail outlets in hotspot provinces are now selling cigarettes below the legal tax rate. This is according to the latest study by market research specialists IPSOS.

In an exclusive interview the founder of Tax Justice South Africa, Yusuf Abramjee, said, “Almost a 10% increase on the figures recorded only a month ago before the big hike in tobacco sin taxes. It is shockingly clear that the excise increase, which was double the rate of inflation,”

Abramjee stated that the increase has triggered a full-scale price war among tax-evading manufacturers, who’ve been gifted more customers and even bigger profit margins.

“The Government lit a fire under the illicit cigarette trade with the five-month lockdown tobacco sales ban last year that handed the market to criminal operators. The excise increase has added fuel to that fire, which is now raging out of control. It is a policy of economic sabotage that rewards criminals and impoverishes our nation.”

IPSOS’s study of almost 4,000 outlets in Gauteng, Free State, and Western Cape found cigarette sold as little as R6 for a pack of 20.

“Cigarettes are retailing for as little as R6 for a pack of 20 – a fraction of the legal Minimum Collectible Tax (MCT) of R21.61. The number of brands owned by the Zimbabwean-owned Gold Leaf Tobacco Corporation (GLTC) found being sold under MCT soared by 13 percentage points in a month; 85% of their brands purchased were illegal.”

Abramjee said the usual suspects are feeding at the trough of illicit trade and being rewarded for their criminality. Meanwhile, the country is being robbed of billions in taxes at a time it can least afford it.

“The Government has unleashed this monster and has a duty to get it back in its cage. We urge lawmakers to institute a Commission of Inquiry immediately to investigate how this has been allowed to happen,”

“In the meantime, SARS must ensure all manufacturers comply with production counter regulations, so illegal operators can be tracked down and held accountable, and South Africa must ratify the WHO Illicit Trade Protocol, a simple step that is years overdue.”

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