Tax Justice SA (TJSA) said in a statement on Thursday that their analysis indicates that tackling the country’s pervasive illicit cigarette trade could deliver a comparable financial windfall for the nation without squeezing citizens further.File Picture :Jacques Naude/Independent Newspapers.
Tax Justice SA (TJSA) said in a statement on Thursday that their analysis indicates that tackling the country’s pervasive illicit cigarette trade could deliver a comparable financial windfall for the nation without squeezing citizens further.
TJSA said that the government is reportedly considering a controversial VAT hike from 15% to 17%, which would inflict an additional financial burden on already struggling citizens. “According to official figures, each percentage point increase in VAT would have raised an extra R29 billion in 2023/24. Meanwhile, a study by Oxford Economics has found that South Africa lost R27.1 billion in tax revenue due to illicit cigarettes in 2022 alone.
This means that cracking down on criminal cigarette syndicates could deliver nearly the same revenue as a VAT hike, without deepening the cost-of-living crisis for millions of South Africans.”
TJSA founder Yusuf Abramjee said that this is a no-brainer. “Why should hard-working citizens be forced to pay more tax when the government is allowing criminal networks to rob the country of billions every year? Instead of punishing consumers with higher VAT, the authorities should prioritise enforcing the law and shutting down the illicit cigarette trade.”
TJSA said that South Africa has one of the world’s largest markets for illegal cigarettes, with at least two in every three cigarettes sold evading tax. “Weak enforcement, corruption and policy failures have fuelled this shadow economy, depriving the South African Revenue Service (SARS) of vital funds needed for essential public services.”
Abramjee added that now is not the time to withdraw the budget that has been planned for SARS. “Instead, TJSA is calling on the government to intensify efforts to eradicate the illicit tobacco trade by increasing enforcement, shutting down rogue manufacturers and invoking SARS’ legal right to install CCTV in all tobacco factories.”
Abramjee said that TJSA believes the solution is simple: enforce the law. “If the government wants to balance the books, it should start by ensuring everyone pays their fair share of tax - especially the criminals who are profiting at the nation’s expense.
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