SARS must taken tough stance on illicit tobacco traders - FAWU

Union says it is unacceptable for such traders to evade what citizens pay for on a daily basis


(8 July 2018, Johannesburg)

The Food and Allied Workers’ Union (FAWU) has noted with concerns the release of the Illicit Tracking Study conducted by global market research firm, Ipsos. The study shows that cheap, illicit tobacco products are flooding the informal retail sector in large volumes, and that they are widely available in 75% of non-organized tobacco handling outlets, with high availability rates in Western Cape (79%) and Gauteng (75%). 

The tobacco sector is a source of employment and income of many for our members in the tobacco value-chain, from tobacco leaf growing up to cigarette manufacturing and the aggressive growth of the tobacco illicit trade, which is said to account for one third of all tobacco products sold in the non-organized retail universe, continues to lead to more jobs lost and the problem will worsened if government does nothing to curb it. 

FAWU, supported by the South African Federation of Trade Unions (SAFTU), is fully behind law-abiding and tax-paying farmers, agro-processing operators as well as manufacturers in the tobacco and other affected value-chains who protested at the offices of SA Revenue Services (SARS) in a FAWU-led National Day of Action against Illicit Trade earlier this year on the 06 March 2018. 

“As FAWU, we call on government to put the pressure on SARS to take a tougher stance on illicit traders who manufacture and sell cheap, unregulated products as they do not pay excise duties and/or Value-Added-Tax (VAT). Every South African can feel the pinch of the recently increased VAT – so it is unacceptable for illicit traders to evade what citizens pay for on a daily basis – right under the nose of SARS,” continues Masemola.

Because Excise duty and VAT are levied on tobacco products the sharp rise in illicitly traded cigarettes from about 2014 means that the Fiscus may have lost close to R24 billion in tax revenue. These funds could have been used to help South Africa attain its developmental goals of growing the economy, increasing social grants, reducing inequality and creating jobs.

Through the manufacturing of and trading in cheap products, illicit traders are a direct threat to thousands of jobs in the pharmaceutical, alcohol, poultry and tobacco industries. Equally important, these products, in addition to lost revenue to the Fiscus, pose risk to the nation’s health. Hence FAWU’s campaign against illegal operators and illicit traders is anchored on three principles of Jobs for the People, Health of the Nation and Revenue to the Fiscus. The Illicit traders of tobacco, for example, sell their branded products at below the minimum collectable tax of Excise duty plus VAT. 

We believe in competition but also believe in competition by legal players and in law-abiding and tax-compliant environment. If anything, a 20-pack of cigarette sold at about R10.50c will defeat the purpose of “sin-tax” that was meant to raise prizes such that the youth are deterred from taking up smoking and smokers are encouraged to quit while serving a source of revenue to the Fiscus.  

“What is disturbing is that our government, SARS in particular, moves very slowly when it comes to taking action against illicit traders,” says FAWU General Secretary Katishi Masemola. “We are here to preserve jobs in the agriculture and manufacturing value chain as we push for improved health outcomes and increased revenue to the Fiscus” he continues. 

Statement issued by FAWU General Secretary, Katishi Masemola, 11 July 2018