FACTS ABOUT ILLEGAL CIGARETTES
The trade in illegal cigarettes erodes legitimate job creation and economic development and undermines the tobacco regulations and other laws of the land. When cigarettes are smuggled into South Africa the smugglers by-pass the regulatory protocol required under the Tobacco Act as well as customs control.
The industry is working together under the auspices of The Tobacco Institute of Southern Africa (TISA) to tackle the issue of the illegal trade in cigarettes with retailers and there is also an awareness campaign planned, aimed at consumers.
Trading in illegal cigarettes is regarded as a criminal offence and is punishable by law. Regular seizures and arrests are being made by the South African Police Services, in conjunction with the SA Revenue Services. The hotspots are Gauteng and the Western Cape (see penalties below).
Essentially there are two types of illicit cigarette products: evasion of taxes on brands imported or manufactured in South Africa; or the counterfeiting of a legal brand. In South Africa the evasion of taxes is the most common one with over 60% of the illegal trade in cigarettes coming across the Zimbabwe border.
The illegal trade in cigarettes is the fastest growing tobacco category globally and locally.
It impacts significantly on the legal market globally and locally.
It has serious ramifications not only for the tobacco manufacturers but also governments, retail trade and the consumer.
The illegal trade in cigarettes fuels other criminal activities and is directly linked to organised crime.
1 in 4 cigarettes smoked in South Africa are illegal products, this equates to more than 25% of the total market.
It is estimated that some 20 million cigarettes (equivalent to 1 million packets of 20s) are sold illegally in the country every day.
Revenue loss to the Government is more than R4-billion in excise and VAT annually, money that can be used to boost much needed public service and infrastructure.
Revenue loss to the legitimate tobacco industry is more than R2 billion.
52% of the price of a cigarettes is made up of excise and VAT.
Consumers need to be suspicious of a pack of 20 cigarettes if it is being sold below R15-00 (see How To Spot Illegal Cigarettes).
If a retailer, or reseller, is caught with illicit products and prosecuted under the Customs and Excise Act (evasion of taxes), the penalties are:
- A fine of R20 000 or three times the value of the goods,
- Up to 5 years in prison.
A person prosecuted can therefore pay a fine and go to jail.
However, if prosecuted under the Tobacco Controls Act (non-compliant product) the penalties are:
- Up to R1 million fine.