Press release – FITA – for immediate release
The Fair-Trade Independent Tobacco Association (“FITA”) notes the recently delivered National Budget Speech by Honourable Minister of Finance Tito Mboweni earlier today.
We commend the Honourable Minister’s announcement that the new Illicit Economy Unit which was launched in August 2018 will fight the trade in illicit cigarettes and tobacco however, we maintain our position that if one seeks to understand the fiscal risks to the economy vis a vis the tobacco industry, one should not restrict their views to purely excise taxes and illegal tobacco alone. One needs to look at the entire sector across all tax types, and along the value-chain holistically. This calls for a need to look at corporate income tax, STC, VAT, PAYE, personal income tax, SDL, UIF, import duties and excise holistically. One then needs to look across the value-chain, from the agricultural sector, to the importers and manufacturing, to retail and wholesale and exports. Different unlawful and illegal practices manifest in different ways across this spectrum. It is only then that one will be able to determine the complete set of risks in the industry. As things stand, and as they have been looked at over the years, the multinationals via campaigns such as the #TakeBackTheTax campaign have dictated public perception. They do this by lobbying at policy levels, financing and directing law enforcement agencies by pretending to be the innocent victims through aggressive media and marketing campaigns, biased research papers and industrial espionage. The result is that there is an extreme focus on losses of excise only, and the perception that illegal tobacco and manufacturing is the sole risk in the industry. British American Tobacco South Africa owes SARS in excess of R 2 billion for the tax period 2006 to 2010, the largest single tax dispute between SARS and a taxpayer, yet the organization they are part of is making the most noise about taking back our taxes. Perhaps they should start at home.
In essence, the old refrain of “smuggling” and “illicit manufacturing” being the primary cause of losses to the fiscus is now running thin. The fact of the matter is that billions are pilfered out of our economy annually by a handful of multinationals through aggressive profit-base erosion schemes. We believe it incumbent on government and the relevant regulatory bodies to put measures in place that will level the economic landscape, including giving local employers and contributors to the economy, equal hearing and platforms. We believe the days of “big business” having some sway over how government should conduct their business should now come to an end, particularly when their influence is applied to the detriment of smaller local manufacturers.
Further, whilst the recently announced increase in excise duty is sure to poses challenges to the market and have an impact on the business interests of our members, we wish to commend the Honourable Minister for not caving into pressure from the multinationals and their numerous and recently formed front groups not to increase excise tax on cigarettes under the ruse that it will increase the illicit trade in cigarettes, which front groups have been set up with sole intention of misleading the public and government into a false perception that said multinationals are advocates for transformation, when the reality is that these groups are merely being used as a smokescreen to push the selfish agendas of these foreign-owned companies whose only interest is lining their already fat pockets.
The aforementioned call from big tobacco is a well-known and misleading scare tactic of multinationals worldwide, which multinationals seek retain their long-standing dominance of the market.
We, as an organization, align ourselves with the views of industry experts and academics that If South Africa is serious about tackling the problem of illicit trade and getting essential revenue back into government coffers, SARS has the ability to act under its existing powers and it does not need, and should not accept, assistance from big tobacco or its front groups.
Issued by the Fair-trade Independent Tobacco Association: 20 February 2019
For queries kindly contact Monique Vogel t: 072 720 7919; e: Monique@fita.co.za