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The government resolved more than six weeks ago to impose a national blockade that banned the sale of cigarettes and alcohol, leading to underground market candidates who thrive in circumventing tax laws.
South African Tax Service Commissioner (Sars) Edward Kieswetter. Image: @ sarstax / Twitter
JOHANNESBURG – The South African Revenue Service (Sars) said on Tuesday it was concerned about the growth of illegal and clandestine markets during the closing period, adding that there was clear evidence that criminal activities were flourishing.
The agency has revised its expected revenue losses due to the illicit trade in products from which its special taxes derive, to R1.7 billion.
The government resolved more than six weeks ago to impose a national blockade that banned the sale of cigarettes and alcohol, leading to underground market candidates who thrive in circumventing tax laws.
Sars Commissioner Edward Kieswetter explained that in the past month, the revenue service has collected data related to the illicit market showing that there has been a surge in the illicit economy.
South Africans who cannot access alcohol and cigarettes through legal channels due to the blockade have turned to the alternative economy, which is depleting the treasury through tax revenues.
Kieswetter said that while Sars had calculated that the annual decrease in excise duties amounts to 54.7%, which is a tax value of R1.3 billion, the amount increased after the inclusion of R400 million in taxes.
He recognized that although it was early, the trend was worrisome.
Sars was presenting his strategy to Parliament’s joint finance committee.
The commissioner also told lawmakers they were receiving requests for deferment of tax payments from affected sectors.
Meanwhile, tobacco producers have launched a court request opposing the government’s decision to ban the sale of cigarettes.
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