South Africa’s recent tobacco tax increase has sparked a criminal price war in the country as manufacturers flood the market with untaxed cigarettes, according to British American Tobacco South Africa (BATSA).
A new independent report by IPSOS shows that the announcement of the 8 percent hike in tobacco taxes appears to have been the trigger for an all-out illegal price war in key provinces.
Three-quarters (74 percent) of retail outlets in Gauteng, Western Cape and Free State are now openly selling illegal cigarettes. This is an increase of more than 7 percent on the last survey conducted before the excise increase in February.
The report showed that three-quarters (74 percent) of retail outlets in the three provinces nationwide sold cigarettes below the legal minimum collectible tax (MCT) level. Mystery shoppers were able to purchase illegal cigarettes in every retail sector more easily than during a similar study in February.
Gold Leaf Tobacco Corp. brands found being sold under the MCT rose by 13 percentage points in a month, and 85 percent of their brands purchased were illegal. One hundred percent and 91 percent of brands owned by Afroberg and Carnilinx, respectively, were being sold below MCT in retail outlets where they were the cheapest products available.
BATSA General Manager Johnny Moloto said that the findings of this latest report illustrate a “national emergency.”
The facilitation of this scale of robbery of billions of rand from the people of South Africa as we continue to struggle with pandemic hardships is totally unacceptable.
“We thought that the levels of criminality and tax evasion that cost every single South African huge sums of money could not get any worse. We were wrong,” Moloto said. “This study shows that, now, three out of every four retail outlets in Gauteng, Western Cape and Free State are openly selling illegal products that are not remitting taxes.
“The facilitation of this scale of robbery of billions and billions of rand from the people of South Africa as we continue to struggle with pandemic hardships is totally unacceptable. The robbery is not just getting worse. This study shows that it’s getting worse on a day-by-day basis.
“This is a national emergency, and it’s clear we need an immediate Commission of Inquiry into the tobacco market in South Africa.”