Press release FITA 23 May 2019

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Press release – FITA – for immediate release

We note without an ounce of surprise the statement by the Tobacco Institute of Southern Africa (“TISA”) and its rented cheerleaders, the #TakeBackTheTax brigade, opposing the decision by the South African Revenue Service (“SARS”) of a tender for the provision of a Production Management and a Track and Trace solution for cigarettes. This has been the cut and paste approach of TISA members worldwide.

It is also not surprising given their history that TISA seem to indicate that they already have knowledge of who SARS has appointed as the service provider, this despite the bidding process not even having closed. They are in essence opposing something which, at this stage, does not even exist. This we find quite baffling but we have no doubt that it has been brought on by the fact that SARS advised industry on 13 May 2019 that any successful bidder in relation to the RFP will have to go through rigorous conflict checks to ensure that they have no association whatsoever with industry, this being in line with the World Health Organisation’s Framework Convention on Tobacco Control.

Today’s TISA statement is basically just another case of the big boys not getting their way and deciding to throw their toys. TISA, and by extension its members, seek to bully government into adopting a system which is controlled by them, as they have done worldwide, in order for them to continue looting the country to the tune of billions.

We have already cautioned SARS and government to steer away from the influence of Big Tobacco when it comes to the selection of the preferred system.

One must be cognisant of the fact that “Big Tobacco” has been a global serial repeat offender when it comes to illicit tobacco, and has spent millions on lobbying to block regulation and promote its own agenda. Growing & diverse sources of evidence indicate that Big Tobacco remains involved in tobacco smuggling and that its cigarettes account for around two-thirds of the illicit cigarette market[1]. Big Tobacco therefore has a vested interest in controlling the track and trace system aimed to curtail this behaviour. To this end, Philip Morris International (PMI) adapted its pack marker system, Codentify, to meet track and trace requirements, licensed it for free to its three major competitors who then collectively promoted it to governments using front groups and third parties including companies claiming to be independent despite clear Big Tobacco links. PMI also sought to suggest Codentify was independent by selling some parts of its intellectual property on Codentify while retaining others, leaving a complex web of shared interests.

[1] https://tobaccocontrol.bmj.com/content/28/2/127?hootPostID=b6c75bf76bc7d3b2d9c6955de6bf04f7

Let us also not forget the recent study released on 30 April 2019, by The Tax Justice Network which dealt with accusations against British American Tobacco (“BAT”) having deprived developing countries of hundreds of billions of Rands in tax by using “financial manoeuvring” to shift profits to a UK subsidiary[1]. The Tax Justice Network estimated that BAT, the world’s largest tobacco company, would avoid paying R 10bn between now and 2030 in Bangladesh, Indonesia, Kenya, Guyana, Brazil, and Trinidad and Tobago. It said that in 2016 alone BAT managed to shift R 13bn, roughly 12% of its group pre-tax profit that year, from overseas companies into its British subsidiary, BAT Holdings. This, it said, reduced the company’s tax bill, partly because UK corporation tax is charged at 19% – lower than many of the countries in which BAT sells cigarettes[2]. These aforementioned figures don’t mention the additional billions BAT is said to owe SARS in South Africa. Are these the people we should be allowing to control systems designed to regulate industry?!

We at this stage as an organisation have adopted the position that we do not have sufficient particularity in as far as the Track and Trace solution in order to comment fully on its merits. The process is still at a very early stage, and it would be very arrogant of us to dismiss the process entirely when we haven’t acquired sufficient knowledge to do so. A preferred bidder for instance is yet to be appointed and we therefore do not know what system is going to be in place. SARS has in any event assured industry that there will be constant consultation with industry in as far as this process is concerned, and industry will at this point have the opportunity to, where necessary, voice its concerns.

SARS and government as a whole should assume the position that Big Tobacco seeks to control the track and trace system in order to avoid scrutiny and minimise excise tax payments, and that any track and trace system supported by Big Tobacco, on intellectual property currently or previously owned by Big Tobacco, or being promoted or implemented by companies with Big Tobacco links, is incompatible with the Illicit Trade Protocol to which South Africa is a signatory, and would therefore not serve to reduce illicit trade

[2] https://www.taxjustice.net/wp-content/uploads/2019/04/Ashes-to-ashes_How-British-American-Tobacco-Avoids-Tax-in-Low-and-Middle-Income-Countries_Tax-Justice-Network_2019.pdf

[3] https://www.theguardian.com/business/2019/apr/30/tobacco-firm-bat-costs-developing-countries-700m-in-tax

Issued by the Fair-trade Independent Tobacco Association: 23 May 2019

For queries kindly contact Monique Vogel t: 072 720 7919; e: Monique@fita.co.za

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