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South Africa could take years to dismantle the criminal networks that emerged and benefited from the ban on the sale of alcohol and tobacco products during the country’s coronavirus shutdown, according to the head of the tax agency.
The ban, aimed at controlling the health impact of the pandemic, has allowed illegal operators to gain a foothold in the market, South African Revenue Commissioner Edward Kieswetter said Monday in an online speech to tax professionals.
Many illegal operators and criminals have now “promoted themselves as honest smokers and drinkers,” he said. “They are now integrated into the supply chain and it will take us years to reverse the impact.”
Tobacco and liquor have remained available on the black market since the ban came into force with the closure of the coronavirus in the country on March 27. Producers and retailers complained that the restrictions have resulted in the loss of thousands of jobs and encouraged illegal trade.
South Africa implemented one of the world’s strictest closures in late March to slow the spread of COVID-19. [File: Dwayne Senior/Bloomberg]
Data from the National Treasury shows that the government lost 9.5 billion rand ($ 568 million) in alcohol and tobacco taxes in the first four months of the fiscal year. A 2018 report released by the country’s producer-funded Tobacco Institute showed that South Africa was already one of the world’s largest markets for illicit cigarette sales at the time.
Four days
While the bans were lifted in the middle of last month, stores can only sell alcohol four days a week, and authorities have warned they could restore sidewalks if necessary.
“The policy achieves no other end than to fuel illegal activity that ignores any regulatory safeguards and does not contribute a penny to the troubled tax service that desperately needs the revenue for the state to meet its socioeconomic obligations,” Gareth Ackerman, president of Pick n Pay Stores Ltd. said at the grocer’s annual general meeting two weeks before the bans were lifted.
The alcohol sale ban also put on hold investment projects worth at least R12.8 billion, with the Anheuser-Busch InBev SA South African Breweries unit, Heineken NV, the glass maker Consol Holdings Ltd. and the wine and spirits maker Distell Group Holdings Ltd. adjusting spending. plans.
The revenue service is working with law enforcement agencies to strengthen its investigative capabilities to address tax fraud and illegal activities, Kieswetter said.
