# illicit cigarettes south africa

As illicit cigarettes undermine both the fiscal and Accessed: 14 Mar 2019, Khumalo S (2018) Revived SARS illicit economy unit already eyeing 58 cases, says Kingon. BACKGROUND: We estimate the size of the illicit cigarette market in low socioeconomic areas in South Africa before and after a tax increase. Forthcoming; Vellios et al. Overall, 19.6% of cigarettes were bought for less than R16.30, which was the tax amount at the time of the survey (Table 3), and 30.7% of cigarettes were bought for R20 per pack or less. Business Day. For example, an individual reports spending a total of R0.50 (0.035 USD) for 5 single sticks (per stick price of R0.10 (0.007 USD)); this is likely a data error, since there is no record of a single stick selling for less than R0.50 in South Africa in recent years, whereas there is extensive evidence of cigarettes being sold for R0.50 each by informal vendors (ACP 2019). Over the past 10 years, the South African tobacco market has become increasingly fragmented as new entrants have entered the market and have taken market share away from the multinationals. In wave 5, NIDS also introduced questions for smokers about their most recent purchase of cigarettes. The substantial increase in the illicit cigarette trade in South Africa since 2010 and especially since 2015 is cause for concern. Packs with 10 cigarettes are the most expensive at R38.20 per 20-pack equivalent, followed by single sticks at R37.17. The illicit market, which was previously too small to affect industry profitability or government revenue significantly, increased significantly in 2010, to about 10% of the total cigarette market (van Walbeek 2014). Dual markets. According to a study conducted by the South African Revenue Service (SARS), the estimated loss through the illicit trade of cigarettes … We assume that a single stick sells for between R0.50 and R4, a 10-pack sells for between R5 and R35, a 20-pack sells for between R8 and R60, a 30-pack sells for between R12 and R90, and a carton of 200 cigettes sells for between R50 and R600. Illicit trade continues to thrive in South Africa, mainly due to constant rises in excise duty. South Africa Tobacco Transformation Alliance chairperson Ntando Shadrack Sibisi said millions of rands were being lost to illicit sales by the the South African Revenue Service daily. South Africa . Twitter. Police raided a warehouse in Mokopane on Wednesday. The illicit trade in tobacco, especially cigarettes, costs South Africa’s economy billions of rand annually through lost tax revenue. Illicit cigarettes are found across all nine provinces. BACKGROUND: We estimate the size of the illicit cigarette market in low socioeconomic areas in South Africa before and after a tax increase. Tob Control 24:e142–e146, van Walbeek C, Vellios N, Ross H et al (2019) Tobacco industry prepared the ground for illicit cigarette trade. For example, for cigarettes sold at ≤R20, a 26% proportion lies in the 95% confidence interval for eight provinces; the only exception is the Northern Cape, where the confidence interval lies above 26%. The illicit trade in tobacco, especially cigarettes, costs South Africa's economy billions of rands annually through the loss of tax revenue. While there are several national estimates of illicit trade, this is the first paper to study illicit trade in low socioeconomic settings in South Africa. A subsequent round of data collection in September 2018 indicated that the illicit market had grown to 33% of the total cigarette market (Ipsos 2018a, b). The first wave of the NIDS survey was conducted in 2008, with a sample of roughly 28,000 individuals, in 7300 households, most of whom have been re-interviewed approximately every 2 years since. The focus of this study is the price of cigarettes, which is used to estimate the size of the illicit market. With regard to individual-level characteristics, the likelihood of purchasing cheap cigarettes varies substantially by race. Aside from the pure criminality of smokers now procuring cigarettes on the black market, boosting the illicit trade and facilitating the operation of a network of syndicates, it is a move that further impoverishes the South African fiscus. To the extent that the original data were, in fact, valid, we would have distorted the data. An important finding is that the prevalence of illicit cigarettes does not differ much between the nine provinces of South Africa. The world is changing fast and to keep up you need local knowledge with global context. Illicit cigarettes are found across all nine provinces. South Africa– Blue Sky Publications (Pty) Ltd T/A TheSouthAfrican Number: 2005/028472/07. In a media release SARS says that “the destruction operation in Springs, which started on […] In South Africa, packs of 20 are the most popular packaging type, and therefore we report all prices as their 20-pack equivalent price. Part of Springer Nature. For most of the post-2000 period, SARS was esteemed for its tax collection and enforcement capabilities, its use of modern technology, and its establishment of dedicated investigation units to pursue tax evaders (Judge Nugent 2018a, b). In Malaysia, first time offence results in up to RM100,000 fine and a 3-year sentence; with a RM200,000 fine and 6-year jail sentence for subsequent offences. }_i= Tot{Exp}_i\\ {} if1\le Tot{Exp}_i\le 4\kern0.5em \\ {}\&\kern0.5em \frac{Tot{Exp}_i}{Stick{s}_j}<0.5\end{array}} $$,$$ {\displaystyle \begin{array}{l}{\raisebox{1ex}{$\mathit{\Pr}$}\!\left/ \!\raisebox{-1ex}{$Cig$}\right. The industry has traditionally been highly concentrated, with British American Tobacco (BAT) having a market share in excess of 90%, followed by other multinationals (primarily Philip Morris and Japan Tobacco) (van Walbeek 2005). 2019). In March 2018, the incoming president, Cyril Ramaphosa, suspended Mr. Moyane as the SARS Commissioner (Petersen 2018). South Africa also needs to ratify the World Health Organization’s Protocol to Eliminate Illicit Trade in Tobacco Products and to implement an effective, independent track and trace system for cigarettes. Cheap cigarettes are purchased in significant proportions in all nine provinces. 2019). The illicit trade in tobacco, especially cigarettes, costs South Africa’s economy billions of rand annually through the loss of tax revenue. Since the sum of the excise tax and VAT in 2017 amounted to R16.30 (1.22 USD) per pack, any cigarettes selling for R20 (1.50 USD) per pack or less are likely to be illicit, assuming reasonable production costs. Cigarette sales have been banned since the start of South Africa’s lockdown on 27 March 2020, as cigarettes are not regarded as “essential products or services”. Businessman Owen George Keyser was sentenced on Wednesday for transporting 40 000 packets of illicit cigarettes and having them escorted illegally. 24 Nov 2013, Baltagi BH, Levin D (1986) Estimating dynamic demand for cigarettes using panel data: the effects of bootlegging, taxation and advertising reconsidered. Of the 4224 smokers in NIDS, 3002 observations were left unchanged, 717 were excluded due to missing data and/or complexities that we were unable to resolve with the rules described in the Appendix, and 505 observations were corrected using these rules. Cigarettes and tobacco products remain banned under current legislation around the coronavrius in South Africa. Using both descriptive statistics and regression analysis, we investigate which demographic, geographic and product-specific characteristics are associated with illicit trade. Illicit trade in cigarettes in South Africa, 2002-2017, Tobacco Control, DOI:10.1136/tobaccocontrol-2018-054798. British American Tobacco maintains its lead but loses share due to high prices Springer, pp 267–286, Chaloupka FJ, Straif K, Leon ME (2011) Effectiveness of tax and price policies in tobacco control. Available at: https://web.archive.org/web/20190314123800/https://www.timeslive.co.za/sunday-times/opinion-and-analysis/2016-04-03-rogue-unit-never-broke-the-law-and-was-very-effective/. Other than being the first nationally representative independent study to estimate the size of the illicit market, this paper quantifies and describes the characteristics of smokers of illicit cigarettes. Tob Control 21:230–234, Joossens L, Chaloupka FJ, Merriman D et al (2000) Issues in smuggling of tobacco products. The finding that a greater percentage of cigarettes sold in cartons and 30-cigarette packs are cheaper than other packaging types holds for all price thresholds. https://doi.org/10.1007/s12117-019-09372-9, DOI: https://doi.org/10.1007/s12117-019-09372-9, Over 10 million scientific documents at your fingertips, Not logged in Thus, even though the number of cigarettes sold decreased by about a third between 1994 and 2009, the real (inflation-adjusted) net-of-tax price per cigarette doubled, allowing the multinationals to maintain their profitability (Linegar and van Walbeek 2018). 19 Oct 2018, Liedeman R, Mackay B (2015) A smokescreen economy: the nature and scale of the township grey market cigarette trade in Delft. The illicit trade in tobacco, especially cigarettes, costs South Africa’s economy billions of rand annually through the loss of tax revenue. For comparison, BAT’s Peter Stuyvesant, the most popular brand in South Africa, sold for about R35 per pack in 2017 (ACP 2019). Therefore, it comes as no surprise that the estimates of the volumes sold between