Most Read Contributor in South Africa, September 2016
An alledged kingpin in the illicit liquor trade is expected to
appear in the Johannesburg Magistrate's Court today as the
South African Revenue Service (SARS) clamps down on traders who
evade paying duty on alcohol.
Illicit alcohol operators smuggle raw alcohol from
sugar-cane-rich countries such as Mozambique and Swaziland to SA
and then use it to either produce their own brands or counterfeit
well-known brands, evading excise duties. The duty on a 210l drum
of alcohol is R22647.
The sale of illicit alcohol deprives SARS of income it would
have received from excise duty and the cheap illicit alcohol could
be unhealthy for consumers because there are sometimes no proper
The defendant, who cannot be named until he appears in court,
faces charges relating to value-added tax and customs offences.
South African Liquor Brand Owners Association ( Salba) CEO Riaan
Kruger said yesterday that his organisation estimated that the
government lost R472m a year from the evasion of excise duty on
Mr Kruger said the excise duty on alcohol was R37 per 750ml
bottle of cane spirits, gin, vodka, brandy, whisky and rum.
"Any bottle that is sold for less than R50 is
SARS spokesman Adrian Lackay said the agency had launched an
operation, which started in the Western Cape but would eventually
become national, aimed at removing all suspected illicit alcohol
products from shop shelves.
The operation also sought to find the source of illegal products
and producers who did not pay excise duties for raw alcohol.
"We are also investigating a number of suspected
syndicates. Our investigations show that in some shops certain
licit brands have already been replaced by the illicit brands as
retailers are being forced to sell 'cheapies' to stay in
business," said Mr Lackay.
"The 'cheapies' are, furthermore, not only
available on retail shelves, but also 'infiltrating' clubs
and other such venues where young people meet."
There were numerous brands being sold for a price lower than the
cost of manufacturing.
"We are not in a position to name any of these brands at
this stage, as part of the investigation is to determine whether
excise duties had been paid," he said.
Law firm Edward Nathan Sonnenbergs was appointed by Salba to
help identify illicit players and work with the authorities to
fight the illicit traders.
Roy Gillespie, forensics manager at Edward Nathan Sonnenbergs,
said legitimate alcohol products were subject to various levels of
criminal exploitation with the primary practice being the avoidance
of paying the high levels of excise duties on alcohol products, and
also to profit from this.
"This does not happen by accident and has a simple
explanation, that being, as with illicit cigarettes, the profits to
be made from evading excise duties and the sale of illicit alcohol
by far exceed the losses from fines and seizures by the
authorities, which are regarded as a minor administrative
obstacle," he said.
Mr Gillespie said a tanker containing 30000l of illicit alcohol
amounted to an evasion of R3,2m in excise duties.
The profits from evading excise duties by far exceed the losses
from fines and seizures
Originally published in Business Day, July 2012.
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Effective collaboration amongst government agencies, automation of processes and capacity building by tax authorities have always been identified by stakeholders as strategies for achieving an efficient tax system.
In response to information provided by FIRS, NSE has sent letters to publicly listed companies, who were purportedly identified by FIRS as non-compliant.
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