For almost four years now, cigarette companies have had a tax holiday. That's the reality. Of all the industries one could think of that should be given a pass on their tax obligations, the tobacco industry would be the last.
It is just one of the many scandals of the Zuma years which we are now uncovering through the State Capture and SARS Inquiries. In June this year, Gene Ravele, former Head of Customs and Tax Enforcement at SARS told the Nugent Commission of Inquiry into SARS that he was instructed by Jonas Makwakwa, right hand man to suspended SARS Commissioner, Tom Moyane, to stop inspecting cigarette factories. That was in 2015.
Ravele was hounded out of SARS shortly afterward and has been harassed ever since by a trumped up criminal prosecution - until this month when all charges were dropped due to a lack of any concrete evidence.
While the innocent Ravele and many other diligent law enforcement officers were being unjustly traumatized by corrupted institutions of State, rogue cigarette companies were building massive businesses and raking in billions and billions of Rands, courtesy of an enforcement holiday provided by the former SARS administration.
In July and August of this year, we were able to scratch the surface of the cost of this corruption. First, the Tobacco Institute of Southern Africa (TISA) released a research report from IPSOS which exposed the rampant growth of illegal cigarettes selling for a fraction of the tax owed to SARS on each pack.
SARS is owed R17.85 on every pack of 20 cigarettes sold in this country. Yet, a single brand, RG, selling for around R10 per pack has become the second fastest selling brand in the country and we understand is now on track to be South Africa’s number 1 cigarette brand by the end of this year. It is possible to buy 20 cigarettes for just R5 per pack - a mere 25c per cigarette, cheaper than anywhere else in the world?
According to IPSOS, these illegal cigarettes are available to buy and are openly displayed in over 100,000 shops in the country, in three out of every four shops in the informal sector. No tax is paid on these cigarettes.
According to IPSOS, they are robbing the South African fiscus of at least R7 billion every year. And that's a conservative number. National Treasury has submitted to both Parliament and the SARS Inquiry that their tobacco tax revenues are collapsing.
In August, Chris Axelson, Head of Tax Policy at Treasury, testified to the SARS Commission of Inquiry that Treasury’s tobacco tax collection was down 20 percent in the past year alone.
Furthermore, in August, the Food and Agricultural Workers Union of South Africa, which represents workers in the legal tobacco value chain of factory and farm workers led a 4500 strong march to Treasury to demand that government collect taxes from all cigarette companies.
Their members are losing their jobs to criminal enterprises and they have had enough. We should all have had enough by now. Payment of tax has been diminished to a mere choice.
Businesses which choose to pay their taxes are at an enormous disadvantage compared to those which do not. As a result, South Africa is at an enormous disadvantage when it levies taxes and fails to collect them from all who owe them.
It is clear: some cigarette companies are paying their taxes and some are not. That is unacceptable. This is why I’ve joined the #TakeBackTheTax campaign launched by TISA back in July, as it’s official spokesperson. TISA’s campaign simply calls on SARS to collect all taxes owed by all operators in the tobacco industry.
Who can argue with that? Not all players in the industry are supporting the campaign or supporting SARS in its renewed effort to clamp down on this illicit trade. The Fair Trade Independent Tobacco Association, which represents the owners of brands selling below the tax owed to SARS, often for as little as R5 per pack, has attacked the campaign relentlessly in the past couple of months. South Africans should ask "Why"?
But there's hope. Under Acting Commissioner Mark Kingon, SARS has already announced the establishment of a new Illicit Economy Team. "The holiday is over" according to Kingon, and we should all applaud that.
The #TakeBackTheTax campaign is about rallying the public to support SARS and to say to them "Get a move on!"