BAT Backs SARS Initiative with R4 Billion to Fight Illicit Tobacco Trade

British American Tobacco (BAT), the largest cigarette producer in South Africa, announces that increasing funding for the South African Revenue Service (Sars) will enable it to recover lost tobacco tax revenue due to illegal trade.

This statement follows the National Treasury’s decision to boost the revenue service’s budget by R4 billion in the recently presented budget, resulting in a total of R7.5 billion allocated over the next three years.

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“Expanding the tax base and enhancing the operational efficiency of the South African Revenue Service enables us to gradually distribute the tax burden more fairly and evenly,” Finance Minister Enoch Godongwana stated during his budget address.

Johnny Moloto, the area head for corporate & regulatory affairs at BAT Sub-Saharan Africa, expressed optimism regarding the government’s pledge to reinforce Sars with additional funding, which is vital in the fight against illicit trade within the tobacco industry.

BAT reported that in 2024, R28 billion in tobacco taxes is projected to be lost to illegal trade this fiscal year, equating to R110 million lost each working day of the year.

Read: ‘Spending cuts have proven ineffective; we now aim for increased tax revenue’ – Godongwana

“Illicit cigarettes can be purchased for as little as R5 for a pack of 20, whereas research based on the previous excise and VAT rates indicates that it is not financially viable for a legal, tax-compliant supply chain to sell a pack of 20 cigarettes to consumers for less than approximately R34,” Moloto stated.

He added: “It is essential that Sars utilizes these additional funds with a concentration on the primary issue, which is the existence of large illegal factories on South African land, coupled with vigorous enforcement measures. This should involve stationing customs officers at every factory to ensure ongoing compliance monitoring.”

According to BAT, the majority of illegal tobacco products are manufactured by known local companies.

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