Online Reporter
SOUTH Africa’s largest cigarette manufacturer, British American Tobacco (BAT), says allocating additional funding to the South African Revenue Service (Sars) will allow it to recover uncollected tobacco taxes lost to illicit trade.
This comes after the National Treasury increased the size of the revenue service budget by R4 billion in the recently tabled budget, bringing the total over the next three years to R7,5 billion.
“Broadening the tax base and improving the administrative efficiency of the South African Revenue Service allows us, over time, to spread the tax burden more evenly and equitably,” Minister of Finance Enoch Godongwana said in his budget speech.
Johnny Moloto, area head of corporate & regulatory affairs at BAT Sub-Saharan Africa, says the company is encouraged by the government’s commitment to strengthening Sars through additional funding, which will be crucial in combating illicit trade in the tobacco sector.
BAT said in 2024, that R28 billion in uncollected tobacco taxes will be lost to the illicit trade this fiscal year.
This translates to R110 million a day for every working day in the year.
“Illicit cigarettes are selling for as little as R5 for a box of 20, while research, based on the excise and Vat rate before the latest increase, shows that it is not commercially viable for a legal, tax-compliant supply chain to sell a box of 20 cigarettes to the end consumer for under about R34,” says Moloto.
He continued: “It is critical that Sars deploys these additional resources with a focus on the primary problem which is large illicit factories on South African soil and accompanied by robust enforcement action.
This should include placing customs officers at every factory to monitor compliance fulltime.” The vast majority of illicit tobacco products are made by known local manufacturers, BAT says. -Moneyweb
