Illegal cigarettes burn up R12bn in taxes

This means that R5bn that was due to the government in VAT and excise duties went up in smoke in 2012 and the problem is still escalating.

In addition to ongoing operations with authorities, the Tobacco Institute of Southern Africa joined forces with the Hawks to clamp down on the illegal cigarette trade in the Northern Cape.

According to Colonel Priscilla Naidu, Kimberley is fast becoming a popular spot for the illicit trade.

"Kimberley is overcrowded with foreigners who are selling illegal cigarettes and there is a need to police the area by means of operations and preventive measures," said Naidu.

At just three shops they confiscated cigarettes to the value of R110,000.

Problems are increasing

But Tobacco Institute of Southern Africa's chief executive Francois van der Merwe said there has been a national increase in the problem.

He said Gauteng is a hub for transport of the cigarettes due to its road, rail and air routes.

Van der Merwe said the trade in illicit cigarettes makes up between 28% and 30% of the total market pointing out that between 2010 and 2012 the government lost more than R12bn in taxes.

"Excise duty alone on a pack of 20s is R10.92. The VAT portion on the excise duty is R1.53 - totalling R12.45. Illicit traders do not pay this tax to government, therefore their profit margins are very much higher.

"This erodes volumes of the legal industry, fuels criminal activities, defrauds government of much-needed revenue and undermines the health agenda because people have a choice to move to cheap products instead of quitting," said Van der Merwe.

Source: The Times via I-Net Bridge