For most of the post-2000 period, SARS was esteemed for its tax collection and enforcement capabilities, its use of modern technology, and its establishment of dedicated investigation units to pursue tax evaders (Judge Nugent 2018a, b). Available at: After seeing another year of increase in 2019, illicit trade accounted for more than a quarter of overall sales of cigarettes. “They are now openly available  throughout the country, along with other brands on which due taxes are obviously not being paid. 1), the first substantial decrease in more than 25 years. If this is the case, then our estimates will understate the size of the illicit market. People who otherwise might have quit smoking continue to smoke, and people who might never have started smoking initiate a habit that will cause them harm, and that they are likely to regret in the future (Pechacek et al. In a media release SARS says that “the destruction operation in Springs, which started on […] Of the 25,075 adults successfully interviewed in NIDS wave 5, 4224 indicated that they smoked cigarettes (Table 1), representing almost 6.7 million of the 34.6 million South African adults. Any cigarettes sold at a price below this could not have met the full tax amount. As illicit cigarettes undermine both the fiscal and health agendas of tobacco taxation policy, these results highlight the need for the South African government to implement urgently effective measures in order to curb illicit trade. While retailers may be ch… All cigarettes sold during South Africa’s unprecedented lockdown have likely been produced on the black market, and therefore poses serious dangers to your health, a local advocate against the sale of illicit products said. }_i=\frac{Tot\ {Exp}_i}{20}\\ {} if\ 8\le Tot\ {Exp}_i\le 60\\ {}\&\kern0.5em \frac{Tot\ {Exp}_i}{Sticks_j}<0.5\end{array}} $$, $$ {\displaystyle \begin{array}{l}{\raisebox{1ex}{$\mathit{\Pr}$}\!\left/ \!\raisebox{-1ex}{$ Cig$}\right. KwaZulu-Natal, the province with the lowest prevalence of illicit cigarette purchases, has the country’s busiest seaport. According to a study conducted by the South African Revenue Service (SARS), the estimated loss through the illicit trade of cigarettes … South Africa– Blue Sky Publications (Pty) Ltd T/A TheSouthAfrican Number: 2005/028472/07. European law enforcement authorities seized 67 million cigarettes and 2.6 tons of tobacco worth €35.82 million ($43.62 million) last month, according to Europol. One of these investigation units was the High-Risk Investigative Unit (HRIU), which, together with other specialized units within SARS, collectively pursued tax evaders and those practising other forms of tax abuse in the tobacco industry. By this definition, approximately 30% of cigarettes consumed in South Africa in 2017 were illicit. Facebook. }_i=\frac{Tot\ {Exp}_i}{10}\\ {} if\ 5\le Tot\ {Exp}_i\le 35\\ {}\&\kern0.5em \frac{Tot\ {Exp}_i}{Sticks_j}<0.5\end{array}} $$, $$ {\displaystyle \begin{array}{l}{\raisebox{1ex}{$\mathit{\Pr}$}\!\left/ \!\raisebox{-1ex}{$ Cig$}\right. In 2018, the Sunday Times again retracted these stories and acknowledged that they had allowed themselves to be manipulated by “a parallel political project aimed at undermining our democratic values and destroying state institutions and removing individuals who were seen as obstacles to this project” (Rupiah 2018). In the months following Moyane’s appointment, many key executives and experienced officials, including the head of the HRIU, were suspended (Judge Nugent 2018a, b). Available at:, Southern Africa Labour and Development Research Unit (2018) National Income Dynamics Study 2017, Wave 5 [dataset]. Undeclared sales occur when manufacturers do not report to SARS what they produce (and then sell cigarettes with no excise or VAT paid). Cheap cigarettes are purchased in significant proportions in all nine provinces. The cleaned data gives a sample of 3507 smokers, representing approximately 5.6 million smokers (84% of smokers from the uncleaned data). This implies a smoking prevalence of 19.3%, with 6.9% of females and 34% of males smoking, which is in line with other national estimates (SADHS 2016; Mukong and Tingum 2018). In the second half of 2018, TISA launched a major public relations campaign, called #TakeBackTheTax, in which members of the public were encouraged to sign a petition to “implore the South African Revenue Service, the Parliament of the Republic of South Africa and law enforcement agencies to act with urgency and take decisive steps in combatting the trade of illicit cigarettes” (TISA 2018). •Data on the price of the most recent cigarette purchase, calculate the proportion of cigarettes sold at very low prices. Illicit trade continues to thrive in South Africa, mainly due to constant rises in excise duty. We also investigate various covariates of illicit trade. Analysis - The illicit trade in tobacco, especially cigarettes, costs South Africa's economy billions of rand annually through lost tax revenue. 2019). According to the South African Revenue Service (SARS), the estimated loss through the illegal cigarette trade for the 2015/16 financial year was R6 billion. Within a month of becoming Commissioner, and following reports in the Sunday Times, South Africa’s largest newspaper, about the existence of a “rogue unit” within SARS, Moyane announced that he had no confidence in the SARS executive committee and disbanded it (Pauw 2017). Between 1993 and 2003, aggregate cigarette consumption reduced by a third and adult smoking prevalence fell from roughly 33% to 24% (van Walbeek 2005). For other price thresholds, a similar pattern holds. In 2018, the real excise tax increased by 3% and the value-added tax (VAT) rate increased from 14% to 15%. The National Income Dynamics Study (NIDS) is a nationally representative panel survey of South Africans (Southern Africa Labour and Development Research Unit 2018). 2019). volume 23, pages242–262(2020)Cite this article., DOI:, Over 10 million scientific documents at your fingertips, Not logged in A systematic review of empirical studies. By. This paper uses these questions to estimate the proportion of cigarettes purchased at specific price points. We use the responses to these questions to calculate per-stick and equivalent per-pack prices. By 2014, SARS had launched proceedings or was acting against at least 13 tobacco manufacturers for crimes including corruption, bribery, attempted murder, money laundering, racketeering, tax evasion and fraud (Pauw 2017). The impact of activities within the illicit economy is a real threat to the country and its impact is enormous. This indicates that it is unlikely that large quantities of illicit cigarettes are imported from overseas. While there are some differences in the point estimates across the different price thresholds and provinces, an analysis of the 95% confidence intervals shows that they overlap in most cases, indicating that the prevalence of buyers of cheap cigarettes in the different provinces is, mostly, not statistically different. Smokers who have never married are more likely to purchase cheap cigarettes than married smokers, at all price thresholds. The illicit market, which was previously too small to affect industry profitability or government revenue significantly, increased significantly in 2010, to about 10% of the total cigarette market (van Walbeek 2014). The Review of Economics and Statistics 148–155, Baltagi BH, Levin D (1992) Cigarette taxation: raising revenues and reducing consumption. The implication is that one cannot reject the null hypothesis that 26% (in fact, anything between 25.2% and 26.3%) of smokers in each of the eight provinces, other than the Northern Cape, buy cigarettes at a price of ≤R20. Fin24. An important finding is that the prevalence of illicit cigarettes does not differ much between the nine provinces of South Africa. The marginal effect of around −0.04 for all price thresholds indicates that a 10% increase in per capita household income decreases the likelihood of purchasing cheap cigarettes (at the chosen price threshold) by 0.4%. The call came as an official from the South African Revenue Service (SARS) was remanded in custody following the seizure of a truck carrying R10 million worth of illicit cigarettes in Limpopo last week. Forthcoming, van Loggerenberg J (2016) 'Rogue' unit never broke the law and was very effective. Available at: The illicit trade is very big in South Africa. Appl Econ 42:545–561. The four definitions of cheap cigarettes allow us to estimate the illicit market with varying degrees of strictness for the minimum price of legal cigarettes; the estimate at R16.30 will be the most conservative, and that at R23 the least conservative, estimate. Business Day. The NIDS survey consists of several questionnaires: household, adult (age 15+), proxy, and child. This has mainly been in the form of smuggling of tobacco products, counterfeit textiles, drug manufacturing and smuggling, illicit mining of gold and diamonds, ivory smuggling and the poaching of endangered species like abalone and rhino. The illicit trade in tobacco, especially cigarettes, costs South Africa’s economy billions of rand annually through lost tax revenue. The illicit estimates are derived from Vellios et al. Illicit Cigarettes Seized Illicit Trade; December 21, 2020; 0 ; Photo: Lithuania Customs. South Africa… Thus, it is reasonable to assume that this individual incorrectly reported spending R0.50 in total, and instead spent R0.50 per stick. Although we present the data for all four thresholds, the discussion focuses on packs that are sold for R20 or less, because we believe that this is the most accurate estimate of illicit trade. Forthcoming; Vellios et al. Independent Online Available at: https://webarchiveorg/save/https://wwwiolcoza/news/south-africa/gauteng/sars-target-of-tobacco-industry-backlash-1728457 31 Jul 2014, Siqoko B (2016) SARS and the Sunday times: our response. represents 3000 people in the population), accounts for 30,000 cigarettes consumed per day (10 × 3000), at R2 each. TJSA founder Yusuf Abramjee says: “Illicit cigarettes have been flooding over our borders since criminals took complete control of the tobacco market during the lockdown sales ban. Google+. For the majority of the survey period (April to December 2017), the excise tax on a pack of 20 cigarettes was R14.30 (approximately 1.07 USD at the timeFootnote 1). Subscribe to our Newsletter to get daily updates on local affairs, with a global context. Accessed: 15 Mar 2019, van der Zee K, Vellios N, Ross H (Forthcoming) the prevalence of illicit cigarette consumption in 6 south African townships. Businessman Owen George Keyser was sentenced on Wednesday for transporting 40 000 packets of illicit cigarettes and having them escorted illegally. In March 2018, the incoming president, Cyril Ramaphosa, suspended Mr. Moyane as the SARS Commissioner (Petersen 2018). The prevalence of illicit cigarettes in Limpopo, the province neighbouring Zimbabwe, is similar to that of most other provinces, which suggests that cross-border trade with Zimbabwe is not driving the illicit trade. South Africa demographic and health survey, Pretoria, and Rockville, Serrao A (2014) Sars target of tobacco industry backlash. In recent years, the illicit trade of cigarettes in South Africa has been dominated by undeclared sales and ghost exports. Since the sum of the excise tax and VAT in 2017 amounted to R16.30 (1.22 USD) per pack, any cigarettes selling for R20 (1.50 USD) per pack or less are likely to be illicit, assuming reasonable production costs. Tob Control, World Health Organization (2013) Framework convention on tobacco control. We used our knowledge of the South African cigarette market and the African Cigarette Prices (ACP) dataset (ACP 2019) to develop informed rules to correct obvious reporting errors. For household characteristics, there is a consistent negative relationship between household income per capita and the likelihood of purchasing cheap cigarettes. The illicit trade in tobacco, especially cigarettes, costs South Africa’s economy billions of rand annually through lost tax revenue. Am J Public Health 80:1057–1061, Petersen T (2018) READ: Ramaphosa's full letter to suspended SARS chief Moyane. He was officially removed from his position in November 2018, on recommendation of the Nugent Commission (Brown 2018; Judge Nugent 2018a, b). The best estimate of the size of the illicit market for the present study is 30.7%, which is in line with the range of estimates in the other studies. Consumption is in millions of 20-packs (Republic of South Africa 1980–2018). We applied price correction rules where obvious reporting errors where identified. British American Tobacco maintains its lead but loses share due to high prices Illicit Cigarettes Seized Illicit Trade; December 21, 2020; 0 ; Photo: Lithuania Customs. Mail & Guardian. Address: Regus Business Centre 1st Floor, … Historically, academic estimates of the size of the illicit market in South Africa have differed substantially from those of the tobacco industry (Blecher 2010; van Walbeek 2014; van Walbeek and Shai 2015), but in the past few years there has been a convergence in these estimates. In the survey, smokers were asked to describe their most recent purchase of cigarettes, specifically the packaging type (which could include single sticks), the number of items/packs purchased, and the total amount that they paid for the cigarettes. Thus, even though the number of cigarettes sold decreased by about a third between 1994 and 2009, the real (inflation-adjusted) net-of-tax price per cigarette doubled, allowing the multinationals to maintain their profitability (Linegar and van Walbeek 2018). The illicit trade has not only caused much revenue loss to the government, but it has greatly undermined the country’s public health agenda. “SARS is losing R36-million ($2.1 million U.S.) per day in excise revenue since the lockdown started, which amounts to R1.5 billion a month,” Sibisi said, approximately $87 million. Natl Tax J 53:59–77, TISA (2018) #takebackthetax. Table 5 presents the marginal effects at the average, taken from the logit regression, for smokers purchasing cigarettes at the four price thresholds (
Rum Miniatures Gift Set, Accountability Quotes For Relationships, Ice Cream Menus, Dangerous Logo For Pubg, Guelder Rose Uses, Adidas Lebanon Online, Chike Coffee Canada, Casa Grande Short Pump, Osu Cph Curriculum Guides, Viz Meaning In Urdu, Capital Grille Kansas City,