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Billions being lost to illicit sales - report

10 Jul 2018. Illicit tobacco sales are costing the government around ZAR 7 billion (EUR 444 million) per year in lost tax revenues, according to a report published by the industry-funded Tobacco Institute of Southern Africa, Bloomberg reported.

Taxes of at least ZAR 17.85 (EUR 1.13) must be paid on every cigarette pack but smokers can buy packets containing 20 sticks for as little as ZAR 5, chairman of the Institute, Francois Van der Merwe, said in an interview prior to the report’s release.

The report says South Africa is now one of the largest markets for illicit cigarettes, and claims that more than 75 per cent of cheaper packs on the market are made by the manufacturer Gold Leaf Tobacco Corp. The company’s RG brand, which holds the largest market share after British American Tobacco’s (BAT) leading Peter Stuyvesant brand, sells for an average price of ZAR 10.50 per pack, according to Van der Merwe.

Gold Leaf Tobacco Corp told Bloomberg it denied the allegations made in the report and said counterfeits of its brands are being smuggled into the country.

Ronan Barry, head of legal affairs at BAT, told Bloomberg illicit trade in the country had led to its factory in Johannesburg operating at below 50 per cent capacity and the loss of nearly 400 jobs since 2014.