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Big money in illicit cigarettes

13 January 2014
Nashira Davids

BIG players in the drugs trade are shifting focus to the illicit trade in tobacco – with the government losing out on billions in taxes every year and worries growing that the trade will result in further growth in organised crime.

Currently 30% of all cigarettes consumed in the country are illicit.

According to the Tobacco Industry of Southern Africa (Tisa) these cigarettes are either manufactured domestically and not declared to avoid paying taxes, or are smuggled into the country.

Since 2010, Tisa chief executive Fran├žois van der Merwe said, the government had lost out on more than R15- billion in taxes.

SARS spokesman Adrian Lackay said cigarette smuggling had become highly lucrative. “We are seeing the migration of big players in the narcotics trade to tobacco smuggling.”

The profit margins were higher and the risks were lower, he said.

When found, cigarettes were confiscated with perpetrators paying stiff penalties as opposed to possible imprisonment for dealing in narcotics.

During 2012-13, SARS reported, 138 million contraband cigarettes valued at R63.4-million were seized.

Van der Merwe said an increase in the number of syndicates and players in the trade had been noticed. “If we let this industry grow we could very well end up with a country overrun by organised crime. We have to do all we can to rid the country and continent of the scourge.

“Illicitly traded tobacco products not only fuel existing organised crime syndicates, but also become an entry point for new criminals because of the low- risk, high-profit nature of the crime.”

In October, one of the biggest busts took place when 1.6 million Pacific brand cigarettes were found hidden in a plum tree on a train in Zimbabwe.

Van der Merwe said smugglers were moving away from transporting large consignments. By reducing the quantity of cigarettes being moved they minimised their losses when caught.

Some manufacturers, he said, practised “excise manipulation”.

They declared some of their product and paid excise on that, but ran a “night shift” that was not declared. This made it possible to put products on the market more cheaply.

“The government needs to do proper audits on these manufacturers. The answer is simple – they need to be closed down because they are defrauding government and eroding volumes from the legal, taxpaying industry,” Van der Merwe said.

According to the British American Tobacco company, the US Department of Justice indicated that those involved in the illicit tobacco trade “also have ties with terrorist organisations”.

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