FACTS ABOUT ILLEGAL CIGARETTES
The trade in illegal cigarettes erodes legitimate job creation and economic development and undermines tobacco regulations and other laws of the land.
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. 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 locally; or the counterfeiting of a legal brand. In South Africa the evasion of taxes is the most common. Some imported brands also do not comply with tobacco regulations.
The illegal trade in cigarettes is the fastest growing tobacco category and it impacts significantly on the legal market globally and locally.It has serious ramifications not only for 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.
More than 1 in 5 cigarettes smoked in South Africa are illegal products, which equates to over 20% of the total market.
It is estimated that some 15 million cigarettes are illegally sold in the country every day.
The annual loss of revenue to the Government is more than R4-billion in excise and VAT - money that can be used to boost much needed public service and infrastructure.
52% of the price of cigarettes is made up of excise
Consumers need to be suspicious of a pack of 20 cigarettes if it is being sold below R16-50 (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.