The legal tobacco industry in South Africa contracted by a further 9.5% in 2022, while the growing illegal market now accounts for more than 55% of the total market.
The growing illicit market translates into an annual loss of between R9 billion and R10 billion in tax revenue for government. The excise tax incidence per pack is 45.2% and with value added tax of 15% government puts R23.90 per pack in its pocket.The minimum selling price should not be below R25 or R30 per pack.Globally, high excise duty and strict, burdensome regulations widen the opportunities for illegal tobacco traders to thrive.
“A high tax on tobacco only fuels the illegal tobacco trade and negatively impacts legal taxpaying players who comply with the laws of the country,” Ismail says. “This is a runaway train that will not be stopped unless certain sections of the bill are completely revised,” he adds.