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Illicit tobacco trade: Cheap manufacturer fights back

Defamation suit simply a ‘ruse to deflect from the real crisis’ – #TakeBackTheTax.

Placing illicit tobacco firmly in the spotlight, one week before the budget, the company that manufactures an alleged illicit brand, has launched two R50 million defamation actions.

A press release issued on Thursday by the #TakeBackTheTax campaign provides details of these defamation suits launched by Gold Leaf Tobacco Corporation (GLTC). GLTC is the exclusive licensee and manufacturer of RG, the brand alleged to be illicit.

Formed in 2018 in response to the escalating illegal cigarette crisis, #TakeBackTheTax is an initiative of the South African Tobacco Institute of South Africa (TISA). Anti-crime activist Yusuf Abramjee joined the campaign in September 2018 as its official spokesperson.

GLTC has launched the actions against the global research house Ipsos and Abramjee. The summons refers to a media release by #TakeBackTheTax in which it is stated that “the biggest selling brand in South Africa, RG, is an illegal brand”. 

The media release that made these claims was issued on November 27, 2018. This was the date of release of the Ipsos report, which showed that “illegal cigarettes have now captured over 42% of the South African informal trade, and are available in three out of every four shops in the country”.

Read: An alarming escalation in illicit cigarette trade

An Ipsos Tobacco Market Study (commissioned by the TISA), was conducted in 2018. It involved auditing a representative sample of 2 058 retail outlets twice in a six-month period. The methodology was peer reviewed by local and international research experts and academics. Ipsos claims that its study is the most robust scientific analysis, of the multi-billion rand illegal cigarette market ever carried out in South Africa, and therefore cannot be ignored.

The Ipsos study was based on the premise that a pack of cigarettes on which all the required taxes had been paid, could not be sold for less than R17.85 per pack. If a pack of cigarettes was sold for less than this amount, this was an indication that the required taxes had not been paid.

The Ipsos research showed that almost 80% of all GLTC’s brands in the market were selling for below the minimum allowed price of R17.85 per pack. The press release concluded: “…which only means one thing; they are not paying taxes – effectively breaking the law and robbing South Africa of billions of rands in lost taxes”.

The Ipsos study also revealed that GLTC’s RG brand was the biggest brand in the market, selling for an average price of just R10 per pack. This is significantly below the minimum taxes owed. 

The study revealed that South Africa is losing over R8 billion per year in taxes, which are not paid (evaded) on illegal cigarettes. The study was carried out in order to quantify the nature and extent of the illegal cigarette trade in the country.

Not daunted by this defamation action, the latest press release refers to GLTC as “a prominent player in the South African illegal cigarette market”.

Abramjee and Ipsos regard this defamation action in the same light as American “SLAPP” suits (a strategic lawsuit against public participation) where large companies attempt to silence and intimidate activists by levelling costly defamation suits against them. A SLAPP suit would typically relate to libel, slander or restraint of business.

The release asserted that Abramjee is firmly committed to fighting the scourge and impact of the illegal cigarette trade, and #TakeBackTheTax stands firmly behind the Ipsos research and its spokesperson

Abramjee says as a result of this legal action, #TakeBackTheTax now looks forward to a transparent and robust legal process that will compel manufacturers dealing in illegal cigarettes like Gold Leaf Tobacco to finally answer to the law. 

“These defamation suits are simply a ruse to deflect from the real crisis in the sector and to intimidate activists, like me, into silence,” said Abramjee. “This legal action conversely also offers a real and unique opportunity to transparently and openly ventilate and thoroughly test the facts.  We look forward to this process.” 

In the communication, it is stated that the #TakeBackTheTax campaign is aimed at encouraging government to act urgently in addressing the illegal trade.

Indirectly, this defamation action places Sars under increased pressure to tackle and curtail illicit tobacco sales, and bring the guilty parties to book.

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All these illegal cigarettes are obviously being stockpiled by people like Tom Moyane for use as hard currency in prison.

Let’s not pretend that so-called “legal” cigarettes aren’t killing MILLIONS of people each year.

As a former smoker, and someone who hates SARS with the fire of a thousand suns, I’m okay with people smuggling cigarettes into SA and selling them for cheaper than the premium brands. That shows you that your laws and taxes are ridiculous. Especially in a third world country such as ours.

Hey Chop, you do of course reaslise that by them paying less tax, you have to pay more? Unless you don’t pay tax?

What I believe most citizens want is a system where all taxes due are paid, and that includes the smoke industry.

Your argument is flawed. Try not to believe everything the tobacco industry tells you.

The taxes on cigarettes are absolutely ridiculous. Hence, there is plenty of room for smuggling. And I’m all for that because the government caused this situation.

The tobacco industry has very carefully chosen to frame the argument as if they are the victims, along with us taxpayers. I don’t believe that for a second. In what universe is a trillion dollar industry that has killed more people than anything else put together the victim?

It would benefit SA more if less and less people died from smoking related diseases each year. Lots of savings in the healthcare industry down the pipe if everyone gave up smoking tomorrow. I think that would offset the loss of taxes from the tobacco industry, to be honest.

On another note, once I had got out of the trap some years ago, I started actually enjoying watching smokers feed their addictions. When you’ve been inside, and then become free of it, it’s really fascinating to watch. Humans are incredibly silly.

few things on earth as smug as an ex smoker.

I agree.

Looks like we’ve got ourselves a current smoker here. Your comment is so typical.

So you read my comment, decided not to engage with regards to the tax issues and smuggling, and went straight for that old chestnut. Good on you, mate.

I hope you enjoy paying all that tax which our esteemed government is stealing at an ever-increasing rate. I’m so glad I don’t contribute in that way anymore.

When I quit it was over R30 for a pack of my favourite brand. How much is it now boepens?

If you’re overweight, as your handle suggests, I feel sorry for you. I truly do. Overweight smokers should pay double on their insurance premiums, but that’s an argument for another day.

Watching smokers standing outside in the rain truly makes my day. It’s like watching evolution at work in front of me.

And air travel. You know what I’m talking about. Watching smokers frantically searching for the one smoking box on the other side of the airport is hilarious.

This scenario was created by the Government through very high taxing of cigarettes (52% tax) and thereby making them very expensive as Tobacco firms pass on this increase in tax to the consumer so that they still make profit.

With economic challenges plus high unemployment people will look for alternatives and a demand for illicit cigarettes was thus created. The same will happen with alcohol soon and it has already started, fake Johnnie Walker whiskey on the streets at half the price.

So the reason for sin taxes is to make it lesser affordable thus less consumed i.e. it works .. partially.. as every ANC policy has. i.e. you can’t have laws, rules and taxes if they are not enforced and under Zuma they removed enforcement completely. So no brainer that there was a proliferation.

Personally I think the high tax is necessary as the state pays for this in sick days and funding for hospitals/medical staff which, given that people have to resort to illegal cigs, means they likely can’t afford to pay for the health risks associated with it either… i mean unless smokers are willing to sign away any use of public medical facilities and pay an additional premium when going to private care (those professionals.. where do they get their skills from?)

So yah. sin taxes, albeit SA not in an ideal world with corruption, have to balance expense. With regard to unemployment thats a tougher sell as i could argue that the clamp down on tik, mandrax, cocaine is negative for the economy as the is an entire value chain that is impacted by unemployment when laws enforced :p 😉

Silly laws and silly taxes will always open up gaps for smuggling.

SA has some of the strictest anti-smoking laws in the world, yet is quite happy to take the tax money each year. Hypocritical, to say the least.

That’s why I’m all for people smuggling cheaper cigarettes into the country.

“.. losing over R8 billion per year in taxes”. If they stopped corruption they wouldn’t be moaning about this mere pocket change

Remembering smoking unlimited. Relaxing as reward when idiots did try to spoil life by politics like apartheid. Take waiting for a bus in Capetown. Coming, but only for non. Smoking a cigarette calmed murder instincts. Idiots, then and now, always see bad sides of smoking, woman,alcohol, and guns. Making laws one after another, to prevent others having fun on this planet.

The Illicit cigarette trade would be easy to clean up if government were serious about it. It would solve the funding gap at SARS and probably take a lot of poor quality cigarette’s off the market. Only problem is there just be a HUGE patronage system in place and string of beneficiaries in high (and low) places that benefit. Would not be surprised if EFF funding comes from this sector and other dodgy elements of our society.

Still making on BAT investments

As a non smoker, I dread the day smokers “en masse” stop

I am not certain why taxpayer resources (police SARS) must be deployed to protect what are private shareholder interests?

It is like fake Adidas / Nike / Gucci gear. These are PRIVATE commercial interests. Let the concerned companies prosecute civil cases on their own dime, not mine!

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