South Africa’s Illegal Tobacco Trade Causes Massive Tax Revenue Loss

South Africa's Illegal Tobacco Trade Causes Massive Tax Revenue Loss


South Africa’s tax agency lost over 20 billion rand ($1.08 billion) in revenue last year due to illegal tobacco trading.

According to South African media outlet IOL, the South African Revenue Service suffered tax losses of over 20 billion South African Rand (approximately 1.078 billion US dollars) last year due to illegal tobacco trading.

According to reports, the 20 billion Rand fund that was initially intended for financing solar power systems could be used to liberate 20 small towns from the control of state-owned power companies.

The head of the customs department, Beales Sillon, pointed out that tobacco has consistently held the top spot in South Africa’s illicit economy, with approximately 15 million illegal cigarettes being lit every day, three-quarters of which are sold in informal retail stores.

The Transnational Alliance to Combat Illicit Trade (TRACIT) has highlighted in its report that South Africa, despite being the largest and most diverse economy in Africa, and the only African representative in the G20 and BRICS economic organizations, faces numerous challenges in illegal trade. These challenges span across sectors such as alcohol, tobacco, fisheries, mining, counterfeit electronics, pharmaceuticals, food, and clothing. The scale of these illegal trade losses is staggering, causing significant revenue and resource loss for an economy that could have otherwise benefited from increased infrastructure investment and improved living conditions for its citizens.

The South African Revenue Service estimates that illegal trade costs the South African economy up to 100 billion South African Rand (approximately 5.4 billion US dollars) annually. The Business Leadership South Africa (BLSA) estimates that the country loses approximately 250 million South African Rand in tax revenue every day.

Furthermore, according to estimates from the Organisation for Economic Co-operation and Development (OECD), South Africa is losing between $3.5 to $5 billion annually due to illicit financial flows, which is equivalent to more than 1% of its Gross Domestic Product (GDP).

These data reveal the serious issues that South Africa faces in combating illegal trade, which not only damages the country’s finances but also hinders economic sustainability.

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