We pay our taxes, says cigarette maker

Gold Leaf Tobacco (GLT) has responded sharply to a recent Moneyweb article on the #takebackthetax advertising campaign funded by the Tobacco Institute of SA (Tisa).

The campaign, with slogans such as ‘Petrol will be cheaper if we take back our R7 billion’ and ‘Vat doesn’t have to increase if we take back our R7 billion’ aims to highlight tax evasion by the manufacturers of illicit cigarettes.

Tisa alleges that the South African Revenue Service (Sars) fails to collect R7 billion in taxes every year by neglecting to inspect all tobacco producers properly.

GLT took issue with Moneyweb for quoting from a recent research report by international research agency Ipsos, which states that RG, a GLT brand selling for an average of just more than R10 per packet, is the second largest selling brand in SA after Peter Stuyvesant.

This is not true, says GLT by way of a letter from its lawyers, Saint Attorneys. The company disputes the Ipsos report completely, saying that it was commissioned and paid for by Tisa, which it says is largely funded by British American Tobacco (BAT).

GLT CEO Ebrahim Adamjee says in a separate letter to Moneyweb that the agenda behind the publication of such a report is to “discredit our good business name among the citizens of our country. We deny being involved in any tax evasive practices whatsoever and rubbish all allegations leveled against us in this regard,” says Adamjee.

He says GLT paid R1.37 billion in excise duty in 2017 and excise duties in 2018 will probably exceed R1.8 billion, of which R804 million has been paid already. He also says that the company is audited by Sars on a regular basis.

GLT says the conclusion in the Ipsos report – that its RG brand is the second biggest cigarette brand in SA – is simply untrue and points to the amounts paid by way of excise and custom duties as proof that it does not sell such large volumes. Adamjee believes the methodology of the Ipsos report was flawed or that the conclusion was deliberately misleading.

“GLT is fully tax compliant of all customs and excise duties,” he says.

As to why several GLT products are available in shops at prices lower than the minimum tax payable on cigarettes, his explanation is that these might be counterfeit products. “GLT is currently fighting a legal battle in Lesotho for counterfeit of its products,” says Saint Attorneys.

The solution to the problem is simple. Sars must act against retailers that sell cigarettes for less than the minimum tax payable. In 2015, a judgment in the Eastern Cape High Court found that tobacco products selling at prices lower than the minimum collectable tax must be illegal. In that matter – which related to sales of Savannah cigarettes at R8 per packet, well below the tax owed to Sars – the judge found that “the logical inference to be drawn is that no excise duty was paid in respect of the cigarettes in question”.

Retailers will quickly stop stocking illicit cigarettes if Sars inspectors start confiscating their stock.