Billions in duty lost to government’s revenue coffers

CAPE TOWN – Estimates of the size of the illicit trade in cigarettes, alcohol and illegally imported clothing runs into billions of rand of lost government revenue in excise duties and taxes, while hundreds of thousands of local jobs are also lost, according to research by Business Leadership South Africa (BLSA).

The research, presented at a BLSA event in Johannesburg yesterday, showed that the most prevalent type of illicit tobacco were cigarette packs sold below master contract token price (R20.01 in 2020). Some packs were sold at R10, the research showed.

The size of the illicit cigarette trade was estimated at 30 to 35percent of the total formal market and 42percent of the informal market. Cigarettes priced at less that R20 were sold in all provinces ranging from 26.7percent of the market in Limpopo, to 37.3percent in the Northern Cape.

The economic impact of illicit tobacco products was estimated to be a R7 to R8billion loss in excise tax and job losses. It also contributed towards increased spending on health.

By volume, the illicit alcohol market was estimated at 14.5percent, or by value R12.9bn, of the total market.