Tax up, but puff goes the revenue — daily news

Durban

As Pravin Gordhan announced a series of sin tax hikes on Wednesday, including a 68c increase for a pack of cigarettes, South African smokers are turning to the illicit trade in tobacco.

And like most illicit trades, deals for illegal cigarettes are made under the counter at shops and cafes, beyond the prying eyes of the police and the SA Revenue Service.

Wednesday’s increase in the price of tobacco would have little effect on smokers like Jenny Smith , 56, of Umbilo, who has been dodging the tax on cigarettes for the past five years.

While a packet of legal cigarettes costs R14.50 for the cheapest brand and R32 for an established brand, an illegal pack on the street can cost as little as R8.

She pays just R10 for a packet of cigarettes which she buys from her local cafe.

«Almost any shop in Durban sells cigarettes for R10,» she said on Wednesday.

«All you have to do is ask. They will either get it from below the counter or go to the back for them. They don’t put them out next to the other brands,» she said.

Smith said that she could not afford to spend R32 for a pack of cigarettes and has grown accustomed to the illegal brands although the brand changes from week to week, depending on what is available.

«They are just like the other expensive brands. I know that they are illegal, but if it was not for it, I don’t know how I would be able to afford to smoke,» she said.

Donavan Premraj , who runs a tuck shop in Overport, said the illegal brands had grown in sales among his customers.

«I hardly even sell the other brands because the average person can’t afford it. Most of the people here are working class who have families to feed, school fees and taxi fares to pay every day.

«People can’t make ends meet, so it is natural for them to want to save where they can,» he said.

According to industry body the Tobacco Institute of Southern Africa, one in four cigar ettes smoked in South Africa is illegal.

It is estimated that about 15 million cigarettes (equivalent to 750 000 packets of 20s) are sold illegally in the country every day.

Revenue loss to the government was more than R2.5 billion in excise and VAT annually, the institute said.

Institute chief executive Francois van der Merwe said that as tobacco products became more expensive, illicit tobacco operators used the opportunity to avoid paying taxes, which in turn allowed them to sell their illegal products more cheaply.

«An unlevel playing field is created with the legal tobacco sector losing market share and the government losing revenue. Only the illicit operators flourish,» said Van der Merwe.

However, the National Council Against Smoking said the «modest» increase in excise duties on tobacco products was not enough to put young people off smoking.

«The Treasury’s priorities favour business above health, based on the naive assumption that containing cigarette excise tax will contain the illicit trade in cigarettes,» the council’s executive director, Yussuf Saloojee, said.

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