As South Africa braces for the tabling of the Budget by Finance Minister Enoch Godongwana on 12 March 2025, concerns are mounting over potential increases in sin taxes, particularly on alcohol and tobacco.
The Tax Justice South Africa warns that such hikes could further empower criminal networks that are already costing the nation an estimated R100 billion annually through illicit trade.
Yusuf Abramjee, founder of Tax Justice South Africa, emphasised the frustration of law-abiding citizens who feel penalised while criminal enterprises thrive. He stated, "Honest, hard-working South Africans are sick and tired of being penalised while crooks are let off scot-free to live in luxury." His comments come as Godongwana prepares to address the nation, with expectations that excise duties will rise in a bid to generate revenue.
Currently, illicit cigarettes alone are depriving the South African treasury of R27 billion in tax revenue every year—an amount comparable to a one percentage point increase in the VAT rate. Furthermore, the illicit alcohol trade drains an additional R11 billion annually. "These criminals are bleeding the country dry while legitimate businesses and law-abiding citizens suffer," Abramjee lamented, arguing that the government's focus should be on enforcing existing laws rather than raising taxes that drive consumers towards illegal products.
Historical data shows that previous sin tax increases have consistently correlated with spikes in illicit trade. In neighbouring countries like Zimbabwe and Mozambique, similar tax hikes led to a surge in cross-border smuggling operations, creating established trafficking routes that continue to challenge law enforcement today.
Yusuf Abramjee, founder of Tax Justice South Africa. Picture: Facebook
Tax Justice South Africa is calling on Godongwana to empower the South African Revenue Service (SARS) and the National Prosecuting Authority (NPA) to take decisive action against illicit trade. "We need real action, not empty promises. SARS and the NPA must shut down illegal manufacturers, recoup the lost billions, and ensure that all businesses pay their fair share to build a better South Africa for all," Abramjee added.
The urgency of the situation cannot be overstated, especially in light of the 'Gold Mafia' exposé in 2023, which exposed rampant corruption with minimal repercussions. "Since the exposé, not a single arrest has been made in South Africa," Abramjee stated. "The implicated individuals are still operating with impunity, profiting substantially while the authorities hesitate. This delay in prosecution raises suspicions of protection and complicity within the system."
Similarly, the Vapour Products Association of South Africa also urged the National Treasury to reconsider the proposed excise duty increases on vapour products, arguing such hikes would counteract efforts to encourage smokers to switch to less harmful alternatives.
Asanda Gcoyi, CEO of the Vapour Products Association of South Africa.
CEO Asanda Gcoyi warned that increased taxes could lead to more smokers turning to the illicit market, further complicating the fight against illegal trade.
Everest Wealth, led by Riaan Grobler, voiced concerns about the increasing tax burden on taxpayers. "The government only wants more and more, and plans must be made to generate additional income from limited sources," he said, highlighting the pressures of a sluggish economy and rising national debt that now exceeds 75% of GDP.
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