Cigarettes under R20 a pack? SARS plans smart stamps to track them

SARS wants a tamper-proof stamp on every pack of cigarettes and bottle of alcohol made in South Africa, scanned on the factory line and reported straight back to the taxman. Commissioner Johnstone Makhubu set out the plan at a post-budget breakfast hosted by RMB, TimesLIVE reported on 24 October.

The target is the illicit trade. Industry representatives told Parliament this month that a legal pack carries more than R27 in tax, while illicit cigarettes sell for between R5 and R20 (Sunday World).

How will the SARS stamps work?

Makhubu said the marker must be easy for compliant producers to use but impossible for criminals to copy. It would be handed to manufacturers under controlled conditions, applied on the production line and scanned there, with the data going to SARS (TimesLIVE).

If a factory says it is producing but no scans come through, SARS would send a response team to the door to ask why, he said.

According to TimesLIVE, SARS has discussed security technology with the South African Bank Note Company. It is also looking at tougher "smart counters" after criminals learned to interfere with the counters it fitted in cigarette factories in 2021 (UA.NEWS, citing TimesLIVE).

Which products could carry the stamps?

Tobacco and alcohol come first. SARS is also considering the system for pharmaceutical products and sugary drinks that attract the health levy, according to the same report. SARS puts the country's illicit goods market at R280 billion.

When will it start?

Not soon. Makhubu told EWN on 22 October that SARS plans to bring in track-and-trace technology for products like alcohol and tobacco over the next two to three years. SARS officials told Parliament they expect to go to market for a tobacco track-and-trace system in the second quarter of the next financial year (Sunday World).

Part of the money comes from the R6.9 billion special appropriation announced in the medium-term budget. Makhubu said SARS expects to receive R4 billion to R4.5 billion of it, to be spent on VAT modernisation, excisable products "where we know that there is a lot of leakage" and new IT systems (EWN).

How big is the cheap cigarette problem?

British American Tobacco cited an Ipsos study that found cigarettes priced below the minimum tax due were sold in three out of four South African stores, and packs under R20 in nearly two-thirds (UA.NEWS, citing TimesLIVE).

Treasury has limited tobacco excise increases to inflation since 2023, largely because of illicit trade, and plans to move annual excise changes from Budget Day to 1 April (Sunday World).

How do you report illicit cigarettes?

SARS asks the public to report places selling illicit goods. You can use its online tax crime report form or call the anonymous toll-free line on 0800 00 2870. You can stay anonymous, and SARS will not give you feedback on the case.

SARS also asks consumers not to buy contraband cigarettes, warning that they often contain low-quality, dangerous substances (SARS).