Latest news with #R28bn
IOL News
2 days ago
- Business
- IOL News
South Africa's illicit trade crisis: Tobacco, alcohol, and fashion industries under siege
Illicit trading has emerged as a staggering threat to various industries in South Africa, with the black market for both cigarettes and alcohol reaching unprecedented levels. Illicit trading has emerged as a staggering threat to various industries in South Africa, with the black market for both cigarettes and alcohol reaching unprecedented levels. Illicit trading has emerged as one of the most pressing issues facing South Africa, pervading various sectors of the economy and costing the nation billions in lost tax revenue. At the forefront of this crisis are illicit cigarettes, now reaching record high levels in terms of market presence. Research conducted by Ipsos reveals a shocking statistic: more than 76.7% of shops across the country now sell cigarettes below the minimum tax threshold applicable on a standard pack of 20. This trend coincides with Finance Minister Enoch Godongwana's aim for the South African Revenue Service (SARS) to collect an additional R20 billion in tax revenue for the financial year, an effort aimed at circumventing new tax measures in the upcoming 2026 budget. Johnny Moloto, Area Head of Corporate & Regulatory Affairs for BAT South Africa, stressed the urgency of the situation. 'With the clock ticking for SARS to collect at least an extra R20bn, these results from Ipsos show the need for immediate steps to plug the leaks in tobacco tax collection,' he emphasised. Moloto further revealed that the illicit cigarette trade costs the country an estimated R28bn annually, equating to R100m lost every working day, surpassing SARS's entire additional collection target. 'Despite increased enforcement activity over the past year, including more raids and product seizures, illicit products remain as available as ever, suggesting that current tactics are failing to address the root causes of tax evasion. Our analysis indicates that the illicit cigarette trade costs South Africa approximately R28bn annually – R100m every working day – representing more revenue than SARS's entire additional collection target. Eliminating this leakage would protect law-abiding taxpayers from bearing additional tax burdens,' said Moloto. While illicit cigarettes have been noted as a growing concern, the Drinks Federation of South Africa (DF-SA) released new research revealing a sharp increase in the illicit alcohol market, which has grown by 55% in volume since 2017. Conducted by Euromonitor International, the research highlights the growing threats illegal alcohol poses to public health and safety, as well as the significant loss of national tax revenue. 'This study is a wake-up call. Communities are being exposed to harmful, unregulated alcohol, and the country is losing billions in revenue. It is urgent that government, industry, and civil society work together to tackle this issue head-on,' warned Dr Shamal Ramesar, Head of Research at DF-SA. Ramesar urged collaboration among government, industry, and civil society to tackle this pressing issue effectively and further called for coordinated action to promote responsible consumption, shut down illegal producers, and raise public awareness regarding the inherent dangers of illicit alcohol. Eustace Mashimbye, CEO of Proudly South African, also highlighted how the prevalence of these illegal practices is crippling the already-stressed local fashion industry. 'For the local fashion industry, illicit trade has domino effects: It leads to job losses in the value chain of the fashion industry, distorts the market by forcing local producers to compete unfairly with illicit traders who incur lower production costs, encourages widespread copyright infringements, deprives the creatives of their hard-earned revenue, compels legitimate entrepreneurs to compete with illegal traders who sell similar but substandard products without complying with safety, health or environment-related requirements, breeds precarious employment where labour regulations are disregarded, deprives the fiscus of much-needed tax revenue, and puts downward pressure on wages and salaries in the fashion industry labour market,' Mashimbye stated. In light of these challenges, industry leaders rallied to march on behalf of the fashion sector, submitting memorandums to the Department of Trade, Industry and Competition (DTIC) and the National Clothing Retail Federation (NCRF). These memorandums were a clarion call for authorities to intensify efforts against counterfeit goods to safeguard jobs and local production. At the Buy Local Summit and Expo, Mashimbye expressed the importance of protecting South Africa's invaluable fashion industry, estimated to be worth over $11bn (R197bn). 'We not only have a moral obligation to protect the sector; it makes economic sense to do so,' he said. In its commitment to combat the increasing threats posed by illicit trade, SARS has reiterated its dedication to revenue collection and facilitating legitimate trade. According to the agency, the illicit economy undermines the rule of law, erodes public trust, and enacts a substantial toll on national security. 'The illicit economy is a global phenomenon that threatens South Africa's society, economy, and national security. Tax evasion, smuggling, illegal transactions, illicit manufacturing, and fraud undermine the rule of law, erode public trust, distort markets, deprive governments of revenue, and enable corruption and organised crime. The pervasiveness of these illicit activities in our country demands that all enforcement agencies work jointly to curb their harmful practices. The illicit economy is complex and requires a whole-of-government response among public entities, the private sector, civil society, and international partners.' SARS revealed it is working with other law enforcement agencies to combat the scourge of the illicit economy. Saturday Star
IOL News
23-04-2025
- Business
- IOL News
EFF's Omphile Maotwe advocates for 'apartheid tax' to safeguard vulnerable families from VAT hike
EFF treasurer-general Omphile Maotwebhas urged the government to tax the rich more. EFF Treasurer-General Omphile Maotwe has urged the government to introduce an "apartheid tax" on inherited apartheid-era wealth instead of raising Value Added-Tax (VAT). Speaking to journalists outside the Western Cape High Court on Tuesday—during the first hearing challenging the legality of the planned VAT hike—Maotwe argued that such a tax reform would not only generate significantly more revenue than the R28 billion shortfall the government seeks to address. She said this would also ease growing tensions within the Government of National Unity (GNU) over fiscal policy. She further criticised Finance Minister Enoch Godongwana for lacking the political will to impose taxes on the wealthy, suggesting that the Minister was 'afraid to approach the rich,' and instead opted for a VAT increase that disproportionately impacts the poor. 'That will give you far more money than the R28bn they're looking for. But the easy target is often the poor. We can't afford to put bread on the table. Imagine with the impact of the VAT increase. 'Our people will die from poverty. The triple oppression of poverty, inequality and unemployment is going to get worse,' she said. The EFF and the DA requested the court to halt tax hikes, arguing that it will cripple the public's pockets. The court is yet to rule. The hike is expected to come in on May 1. In his defence, Finance Minister Godongwana emphasised the necessity of the VAT hike to sustain critical public services, including healthcare, education, transportation, and public safety. Legal submissions from the Treasury argued that the VAT increase is the most viable and sustainable option given current fiscal constraints, limited borrowing capacity, and the risks associated with further budget cuts. In contrast, Maotwe has advocated for a more progressive taxation approach. She has called on the government to shift the fiscal burden onto high-net-worth individuals by introducing a wealth tax and closing loopholes that allow trusts and luxury properties to evade fair taxation. 'We are telling him he doesn't need to increase VAT. He needs to tax the rich. Introduce a wealth tax. Many trusts hold luxury properties which are not being taxed, but they use the portfolios to apply for loans at the banks,' she said. She also proposed an increase in the corporate tax rate from the current 27% to 29%, citing strong profit margins in the private sector. IOL Politics Get your news on the go, click here to join the IOL News WhatsApp channel.
Zawya
04-04-2025
- Business
- Zawya
South Africa 2025 Budget: Fiscal steps get nod, VAT set to rise
Parliament has officially adopted the 2025 Fiscal Framework and Revenue Proposals following a heated debate on Wednesday, 2 April 2025. The Standing Committee on Finance's report on the national budget was also approved, with 194 votes in favour and 182 against. This decision sets the stage for key financial policies shaping South Africa's economic outlook in the coming year. "The question that the 2025 Fiscal Framework and Revenue Proposals and the report of the Standing Committee are thus adopted,' presiding officer Cedric Frolick said after the votes were counted. This means the government has approved the 2025/26 National Budget, tabled on Wednesday, 12 March, for a phased increase in the value-added tax (VAT) rate. The rate will rise by half a percentage point in 2025/26 and another half a percentage point in 2026/27, bringing the rate to 16% by the latter year. These measures are expected to generate an additional R28bn in 2025/26 and R14.5bn in 2026/27. Earlier in the debate, chairperson of the Standing Committee on Finance Mkhacani Maswanganyi outlined the steps taken since Finance Minister Enoch Godongwana delivered the Budget Speech in March. 'The Minister, together with the commissioner of the South African Revenue Service (Sars), briefed the committee on Friday, 14 March 2025. On 18 March…the committees of Finance, both in the NCOP [National Council of Provinces] and the NA [National Assembly] received the post-budget input from the Parliamentary budget office and the financial and fiscal commission. 'The committee issued adverts for public hearings…on websites, social channels and print media. The committees held public hearings on 25 March 2025 [and] we received 51 submissions – 29 written and 22 orally. 'National Treasury and Sars responded to the issues raised during the public hearings and engaged with the committees and stakeholders on 28 March 2025,' he said. Following that, the committee secretariat sent out a draft report and set an agenda meeting for both the Standing and Select committees on Finance to consider and adopt the report. 'The report…is a result of an extensive process,' Maswangayi said. Federal Leader of the Democratic Alliance (DA), John Steenhuisen, said the DA does not support the budget in its current form. He said the party will file papers in the Western Cape High Court to challenge Parliament's passing of the 2025/26 National Budget. "This VAT hike budget will make life more expensive for everyone and the DA will go to court to fight for the interests of all South Africans," he said. The new VAT increase in South Africa is scheduled to take effect on Thursday, 1 May 2025.
