We pay our taxes, says cigarette maker

Gold Leaf Tobacco says it has paid more than R8.2bn in excise duties over the last 12 years.
While several of the company’s products are available in shops at prices lower than the minimum tax payable on cigarettes, CEO Ebrahim Adamjee says these might be counterfeit products. Picture: Moneyweb

Gold Leaf Tobacco (GLT) has responded sharply to a recent Moneyweb article on the #takebackthetax advertising campaign funded by the Tobacco Institute of SA (Tisa).

The campaign, with slogans such as ‘Petrol will be cheaper if we take back our R7 billion’ and ‘Vat doesn’t have to increase if we take back our R7 billion’ aims to highlight tax evasion by the manufacturers of illicit cigarettes.

Tisa alleges that the South African Revenue Service (Sars) fails to collect R7 billion in taxes every year by neglecting to inspect all tobacco producers properly.

GLT took issue with Moneyweb for quoting from a recent research report by international research agency Ipsos, which states that RG, a GLT brand selling for an average of just more than R10 per packet, is the second largest selling brand in SA after Peter Stuyvesant.

This is not true, says GLT by way of a letter from its lawyers, Saint Attorneys. The company disputes the Ipsos report completely, saying that it was commissioned and paid for by Tisa, which it says is largely funded by British American Tobacco (BAT).

GLT CEO Ebrahim Adamjee says in a separate letter to Moneyweb that the agenda behind the publication of such a report is to “discredit our good business name among the citizens of our country. We deny being involved in any tax evasive practices whatsoever and rubbish all allegations leveled against us in this regard,” says Adamjee.

He says GLT paid R1.37 billion in excise duty in 2017 and excise duties in 2018 will probably exceed R1.8 billion, of which R804 million has been paid already. He also says that the company is audited by Sars on a regular basis.

GLT says the conclusion in the Ipsos report – that its RG brand is the second biggest cigarette brand in SA – is simply untrue and points to the amounts paid by way of excise and custom duties as proof that it does not sell such large volumes. Adamjee believes the methodology of the Ipsos report was flawed or that the conclusion was deliberately misleading.

“GLT is fully tax compliant of all customs and excise duties,” he says.

As to why several GLT products are available in shops at prices lower than the minimum tax payable on cigarettes, his explanation is that these might be counterfeit products. “GLT is currently fighting a legal battle in Lesotho for counterfeit of its products,” says Saint Attorneys.

The solution to the problem is simple. Sars must act against retailers that sell cigarettes for less than the minimum tax payable. In 2015, a judgment in the Eastern Cape High Court found that tobacco products selling at prices lower than the minimum collectable tax must be illegal. In that matter – which related to sales of Savannah cigarettes at R8 per packet, well below the tax owed to Sars – the judge found that “the logical inference to be drawn is that no excise duty was paid in respect of the cigarettes in question”.

Retailers will quickly stop stocking illicit cigarettes if Sars inspectors start confiscating their stock.

COMMENTS   6

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in and an Insider Gold subscriber to comment.

SUBSCRIBE NOW SIGN IN

FICA is completely selective. That’s why most politicians are not in jail.

I love seeing people smoke. Lets me know exactly who the stupids are.

Dear Sars, my guilty conscience has been keeping me awake at night – enclosed, please find R8.2bn in lieu of unpaid taxes. If I still cannot sleep, I will consider sending you the balance owed to you. Signed: Anon.

If the R10 a packet of Gold Leaf cigarettes currenlty being sold in shops are indeed counterfeit, one would expect that GLT & BAT would be partners in dealing with illicit cigarettes not adversies wouldn’t you?

GLT you have convinced me!

I wish ordinary tax payers could be as selective about when and how much tax they pay! We could all then declare a much lower income than is true and end up not paying taxes at all. Oh for selective accounting!!!

Good chance that the cigarettes have been exported to neighboring countries at the zero rate instead of the Vat standard rate of 14/15% notwithstanding that they have never left RSA.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Subscribe to our mailing list

* indicates required
Moneyweb newsletters

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.
INSIDER SUBSCRIPTION APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING

Follow us:

Search Articles:
Click a Company: