A Gauteng High Court, Pretoria ruling has paved the way for the South African Revenue Service to install CCTV monitoring equipment at licensed customs and excise warehouses operated by tobacco product manufacturers.
The judgment handed down on December 29 was in response to two urgent applications brought by several tobacco product manufacturers led by the Fair-Trade Independent Tobacco Association (Fita).
The court found that the interdict applications lacked urgency and struck them off the roll.
In the applications, the applicants had sought to interdict Sars from implementing a rule that would allow it to install the CCTV equipment at the warehouses.
The legality of the rule is being challenged in a review application which is pending before the court and the court in the interdict case found there were no reasons provided why the applicants could not await the outcome of the review application.
According to the judgment, Sars said the rule was introduced in an attempt to curb the illicit trade of tobacco products in the market, that had resulted in a significant tax gap which was costing it and the fiscus R7 billion to R8bn. It said the rule would provide for warehouses to be monitored on a 24-hour basis using CCTV equipment.
In response, the applicants had argued that the rule was unconstitutional and was an “unjustified violation of the right to privacy, dignity and property”.
Yusuf Abramjee from Tax Justice SA welcomed the ruling.
“This is a vital breakthrough against the illicit tobacco barons who are robbing the country of over R27bn a year by flooding the market with tax-evading cigarettes.
“We are urging authorities to now enforce the law to prevent this industrial-scale looting.
“Authorities must ensure regulations are properly enforced to halt the crippling theft of vital revenue that should be building a better South Africa for all.”
Sinenhlanhla Mnguni, chairperson of Fita, told eNCA the move by Sars was drastic.
Speaking to “The Mercury”, Mnguni said it commended efforts by Sars to ensure that compliance risks in the tobacco industry along the value chain were kept at a minimum.
“This includes inter alia the stationing of Sars customs officials permanently in cigarette manufacturing factories and the installation of production counters on the manufacturing machinery.
“We, however, wish to point out that the lack of visibility of Sars customs officials on the ground, coupled with what has been reported as the erosion of institutional knowledge at the receiver, has led to a substantial growth in the influx of smuggled tobacco products into the Republic of South Africa via inter alia our porous borders. To this end, we have alerted Sars and other law enforcement agencies to this, and we have as an organisation done our best to assist them in combating this scourge.”
Mnguni added that there were a large number of foreign cigarette brands in the local market which do not comply inter alia with the tax laws of the country.
“In this regard, we have been collecting the necessary intelligence which we are intermittently handing over to Sars and other relevant authorities.”
Professor Irrshad Kaseeram, from the University of Zululand’s economics department, said the Covid-19 pandemic opened up a new avenue for illicit cigarette trade to thrive.
“According to Sars, R100bn a year is lost in illegal cigarette trade. Some institutions have estimated loss in Sars tax revenue to be about R250 million a day.
“Hence the illicit trade is a lucrative market and the criminals involved will stop at nothing to continue their dealings.”
Kaseeram added that CCTV installations will assist to an extent but given the huge gains to be had, criminal syndicates will take other measures.
“Continued high-level policing involving state-of-the-art infrastructure is needed on an ongoing basis.
“Additionally the criminal justice system must adapt to make it costly for those convicted of such crimes, so it will serve to disincentivise others to pursue such operations.”
Sars said it would use every legal provision in law, in this and any other instance, to pursue its legal mandate of collecting all revenues that are due, maximising compliance as well as facilitating legitimate trade.