Sars' track plan 'might not work'

Illicit cigarette trade has been on the rise and it is estimated the country has lost R8bn in taxes./Kevin Sutherland
Illicit cigarette trade has been on the rise and it is estimated the country has lost R8bn in taxes./Kevin Sutherland

The track and trace system that the SA Revenue Services (Sars) wants to introduce has not worked in Kenya and may therefore, also not work in SA, this is according to cigarette manufacturer British American Tobacco (BAT).

Sars wants to introduce a system that will track cigarettes manufacturing processes as a fightback against illicit cigarette trade which leads to the country losing billions in uncollected tax revenue.

Illicit cigarette trade has been on the rise in SA and it is estimated to have cost the country R8bn in taxes last year alone.

BAT, one of the largest cigarette manufacturers in the world, has raised concerns about the track and trace system that Sars wants to adopt from Kenya.

The Kenyan Revenue Authority uses a paper-based fiscal marker which gets placed on a pack of cigarettes in the factories during the manufacturing process.

BAT has raised a few concerns about the physical sticker, saying it was not ideal as it can easily be stolen and reproduced.

"The envisaged paper-based fiscal markers are more easily stolen, counterfeited or forged than digital markers printed on a pack at the machine," said BAT SA anti-illicit trade manager Anelisa Mzinyathi.

Mzinyathi said the system will make it difficult for manufacturers to export to other countries which will result in job losses.

"A requirement that all products manufactured in SA contain the fiscal markers required will make it impossible for local manufacturers to export to foreign jurisdictions with different fiscal markers or packaging requirements," said Mzinyathi.

"The resultant adverse economic effects will not be limited to the loss of jobs and state revenue, but also all the local leaf growers and others who supply goods and services to the tobacco factories in SA. Ten thousands farmers will be immediately wiped out, putting another 35,000 dependents at risk."

The Kenyan Revenue Authority have, however, said its track and trace method applicable on tobacco, wines and spirits, the Excisable Goods Management System (EGMS), has seen success and reported an increase in revenue.

"EGMS was first implemented on tobacco, wines and spirits which have since recorded an increase in revenue collection. This is a clear indication that implementation of the system has lived true to its form," the Kenyan Revenue Authority reported.

According to them, the method has been so successful that they have now taken a decision to extend this method to cover products such as bottled water, juice and cosmetics, starting in November.

BAT in Kenya have raised concerns that in their packaging process, the marker is the most expensive item which in turn hurts their profits.

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