The Illicit Cigarette Trade Costing South Africa R100 Million Daily In Lost Revenue

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These codes on a packet of cigarettes used to be important more for stock rotation as cigarettes do have a shelf life. They were used for checking stock and a good example was stock having been moved in a truck with washing powder that was now damaged as tobacco absorbs smells and was now not fit for sale. We also did raids which I will talk about later in the article.

This is one topic I know of very well having been involved in the cigarette business for most of my career. The illicit trade is reportedly costing the county around R100 million a day in lost excise duty. This is more than what the South African Revenue Services require to plug their short fall. This is actually a simple fix for those that understand this business and with this problem not being fixed you have to ask the questions why and who is benefitting from back handers.

Knowing how the excise duties work having had to forecast orders in the UK before the budget announcement you do wonder why there is a problem in SA. This excise duty is a constant source of revenue generated daily when stock moves across the floor in the factories. There is a physical line that once stock has crossed automatically triggers a payment which is the tax on each box of cigarettes.

The factories in the UK have HMRS employees physically on site and the stock movement is monitored. You would think or like to think this is happening in SA, but obviously this is not happening. British American Tobacco who is the biggest supplier/manufacturer in SA is not where the problem lies and it will be with the other manufacturers.

BAT were the ones who conducted the research into how big the illicit trade was and have been speaking against this as it does affect their sales. When you consider the duty on one pack of cigarettes is R20.80 so if a packet sells for R20 you automatically know these are being sold illegally.

Doing a quick Google search it shows there are 4 other manufacturers of cigarettes in SA besides BAT. Knowing what brands each one makes it would be easy to check who is bypassing the duties. The brands coming across the various border posts would also make up for some of the illicit trade.

In the past it was easy to bypass and I guess it is even easier today with corrupt officials. The bonded stock for export would be documented which would be duty free and this should leave the country. The paper work used to leave the country, but the stock used to remain and would then be distributed locally once they had the signed documentation proving the manufacturer was legitimate and above the law even though they were crooked. This was how it used to work and I guess is still very much in play. Even if you had excise and customs officials inside the manufacturer you would see the stock leaving according to how it should work, but would not be able to see it crossing the border. What is required is another team that does this work and very doubtful this is in place.

If you consider R100 million is being lost daily you could throw R1 billion at this monthly and still earn an extra R2 billion monthly as extra revenue. This tells you someone higher up the food chain does not want this resolved as they are making a fortune from this revenue theft.

Every packet of cigarettes has a manufacturers stamp which tells you when it was manufactured and specifies the time, shift and date incase there are quality issues. This data can be used to tie it back to which shipment and if this was an export order or a local order. We used to do raids and spot checks on various outlets specifically looking for certain codes and you would find illicit stock very quickly and this is not rocket science. With my knowledge and expertise I could fix this illicit trade within a matter of months and I know many others who could do as well as we did this many years ago.

Fixing this would save the tax payers having to pay more tax which has already been raised by SARS. The problem is if you do not want to fix the problem then it will never be fixed. The country is being raped by corrupt officials at the expense of the population and this needs to be dealt with as this is a very simple quick fix.

Posted Using INLEO