Plugging Tax Evasion
Court victory for SARS monitoring tobacco warehouses via CCTV cameras
The revenue service will go ahead with installing CCTV cameras in big tobacco warehouses after court dismisses attempts to stop the rollout.
The Gauteng High court has handed the South African Revenue Service (SARS) a significant victory in its ongoing attempts to plug fiscal gaps due to illicit tobacco trade by installing CCTV in warehouses.
SARS and the fiscus loses estimated R8-billion annually due to the illicit trade of tobacco.
The Fair Trade Independent Tobacco Association (FITA), representing 80 percent of licensed cigarette manufacturers in Southern Africa took SARS to court in an attempt to stop the installation of the surveillance.
The judgement was handed down with costs by acting judge Jacques Minnaar on 29 December in the North Gauteng High Court.
In two separate applications, 11 tobacco companies sought to prevent SARS from implementing “Rule 19.09” promulgated under the Customs and Excise Act
The Act requires registered licensees who manufacture or store tobacco products to allow SARS to install CCTV monitoring equipment at licensed customs and excise warehouses operated by tobacco manufacturers.
The new rule was introduced in an attempt to curb the illicit trade of tobacco products which resulted in “a significant tax gap costing SARS and the fiscus approximately R8-billion every year” noted Minnaar.
Stalling
SARS had informed all of the companies concerned of its intention to implement the new rule aimed at accounting for every product manufactured and imported on which duty must be paid.
Warehouses are licensed as custom-control areas which means that a condition for a licence is that SARS officials are granted unrestricted access to install these cameras.
The tobacco companies argued that the new rule is unconstitutional and that it was an unjustified violation of the right to privacy, dignity and property.
While some of the companies had argued that SARS had given undertakings not to proceed pending a review application of the new rule, no such agreement had been made, noted the court.
The review application was launched by FITA applicants in November 2022 and is pending before the court.
“It is clear that SARS at all times that it intended to implement the new rule and in the absence of an undertaking which was expressly sought, this explanation does not bear scrutiny,” said Minnaar.
Not only that, said Minnaar, but one of the applicants had only applied for and was granted a licence after the rules had come into effect. The tobacco companies had been, noted the judge, “fully aware of the new rules when they applied for the licences and agreed to be bound by them”
While the tobacco companies had been aware of the rollout and had received implementation notices they had waited till November 2023 to launch their applications.
Attempts to install cameras in June had been unsuccessful as SARS officials had been barred from entering the premises. This had not been disclosed to the court by the companies in their founding affidavits, Minnaar noted,
“There is no doubt that SARS has never given the impression or created the expectation that it would not implement the rule,” he said.
The companies were all aware of the installation of CCTV cameras at British American Tobacco and Gold Leaf in February 2023 the court said, Because of the delay in launching their application with absent explanation the tobacco companies failed to meet the requirements to interdict SARS. DM
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Welcome back Marianne,hope the holiday was nice,and you ignore the red beret criticism,here’s to a great year for DM
Now for the appeal!
This will hit certain political parties hard.
They should rather zoom in on the bank accounts of the top echelon (and family members) of Government. Sin taxes are the easiest to monitor, at source mostly, however R8 billion is “Mickey Mouse” compared to the State Capture amount. Here’s to hoping in 2024!
Yes, especially the KZN family of a certain gap-toothed individual, who, after initially denying she knew tobacco smugglers, appeared on a photo with her gap-toothed smile, flanked by self-admitted smuggler, Adriano Mazzotti, in The Times, under the headline: “Smoked Out.”
Mazzotti also openly funds the goons in their little red overalls.
Bad day for Malema
Do these Cameras find their way into the Zumas premises as well..
The thin end of the wedge. The slippery slope. This will not end well.
I don’t think it’s a good thing that the government in any incarnation is increasing their surveillance of us. Regardless of the supposed good reason, this is a TERRIBLE precedent!
Does the sin tax serve the purpose for which it was created or is it just a revenue generator ? Smoking and alcohol consumption has not decreased even with increase in prices. Why not do away with it , and let the free market rule. With BAT’s advantages and without the sin tax penalty they would be able to compete and the market will decide which companies survive. Have to find other means to prevent smoking and alcohol consumption and to plug the revenue shortfall.
👍
Whilst the sale of tobacco in my opinion is despicable, there must be a point that SARS has to demonstrate their own value and the reciprocation of service rendered in exchange for the money they take from us. The primary reason companies avoid and evade tax is that it is inherently unfair exchange. If we had a government that made and equal contribution towards the improvement of business conditions, we might feel more amenable to paying all these ridiculous taxes. For example, despite the massive devaluation of the rand, we continue to pay transfer duty on primary residences at the highest level, making the purchase of property unaffordable. Most other countries do not get away with this. The property rates we pay for our houses are exorbitant in spite of the fact that we are not delivered the services we are being charged for. SARS does not have an automatic right to take tax, it is a right inferred upon them by the people, in exchange for services to be delivered. If they don’t deliver, then that right should be removed. They cannot steal money forever and get away with it.
Jenifer, SARS only act as a collecting agent and the money is spent by our “government” as they see fit (fill the trough and let cadres eat), so you cannot blame SARS for the lack of service delivery. That responsibility sits squarely on the shoulders of our “government”.
I am pleased at this ruling. Why should these crooks in the tobacco industry get away with literally billions in unpaid taxes and be allowed to use the money they “save” to pay bribes etc. to dubious politicians? Similarly, property rates are levied by your municipality and the money does not go to or via SARS, so blame your municipality for lack of local service delivery, not SARS.
SARS after Moyane is getting back to its old self of being one of the most honest and efficient revenue collectors in the world. GO SARS!!!
Dream on Jen. When a government starts “ruling its subjects” al pretenses that taxpayers are more than a source of revenue is abandoned!
Sounds eminently reasonable. Hope they are tamper proof.
Hopefully they will see the envelopes that pay for agent woodwork’s lifestyle!
” 11 tobacco companies sought to prevent SARS from implementing “Rule 19.09”. ”
Why are the names of these companies not given?
If you have nothing to hide then there should be no objection. If you are honest, then the cameras would be welcomed and an opportunity to shows SARS that they are wasting Tax Payers money by installing cameras which are not of any benefit to themselves or SARS.
I can’t help being overwhelmed by the irony – the public health burden of cigarettes and the tacit taxation of the poor neatly tucked away out of sight while the government battles for tax justice. I guess that’s related to the national health plans afoot and another place for extorting more tax from the wealthy.
Great article to start 2024! Thanks Marianne. Well done SARS!
The massive losses of tax revenue on tobacco and liquor sales and imports in the past 3 years may be attributed to the actions of a single individual, Nkosasana Dlamini Zuma. Her banning of tobacco sales in the Covid lock-down period resulted in an epic increase in the size of the elicit cigarette trade which achieved the size and status of an industry. Dlamini Zuma was accused of aiding and abetting the growth of this illicit industry because of her connections with step son Edward Zuma and Adriano Mazzotti both of whom are suspected to be heavily involved in it.
Her banning of liquor sales in the lock-down period resulted in major losses of tax revenue as well as massive losses in wine and brandy export orders. SARS is to be recommended for their efforts in undoing the actions of Dlamini Zuma. It says little of the ANC that they supported this type of lunacy with its resultant harm to South African citizens and the affected business industry sectors.
Hi -tec tamperproof packing identification would be more effektive and simple to apply. Even the abandoned tax-banderole was working reasonably.
Currently there is almost no control, but some influential and connected people are allowed to ‘eat-a-bit! The political will to take the feeding-trough away is nonexistent!