Tobacco industry 'misled MPs'
2007-01-24 16:58
Cape Town - The director of the national council against smoking, Dr Yussuf Saloojee, claimed on Wednesday that the tobacco industry had misled parliament's health portfolio committee about its compliance with the law.
This followed a presentation by the chairman of the Tobacco Institute of South Africa, Francois van der Merwe, in which he said the "legal" tobacco industry in South Africa was not involved in cigarette smuggling, and enjoyed the trust of the SA Revenue Service (SARS).
"He omitted to mention that Mastermind, which is a legal tobacco company, was charged by SARS for fraud and tax evasion totalling R48m," said Saloojee.
Arrests in the case, which has yet to come to trial, took place in 2005 and SARS claimed at the time that Mastermind was falsely declaring cigarettes were being exported.
This would qualify for VAT zero-rating, but instead they were allegedly selling them locally.
Saloojee said that in an earlier court case South African tobacco company Rembrandt accused rival Philip Morris of smuggling Marlboro cigarettes into the country.
Tax evasion
In reply, Philip Morris charged that Rembrandt, itself, was the biggest local supplier of smuggled products.
"There have been lawsuits against international tobacco companies by the European Union, Canada, Ecuador and several other countries regarding tax evasion and smuggling," he said.
There was also ample evidence in the international tobacco industry's own documentation, much of which had been made public, to show that it controlled smuggling.
However, Van der Merwe rejected the suggestion that he had misled the committee.
"Legal South African companies have been accused of smuggling, but those accusations are unfounded," he said.
"I will definitely say no (to Saloojee's accusation). He must substantiate any illegal activity on the legal industry's side."
Van der Merwe conceded that the East London-based Mastermind was a legal company and was in court, but said: "We don't concur with any illegal activity.
"We will expose the illegal industry... Even in a controversial industry, we pride ourselves in complying with the laws of this country.
"We pride ourselves in being as compliant as possible."
He said that last year the industry had formed a working partnership with SARS with the sole aim of developing strategies to bring down the illegal trade in tobacco products.
SARS had been asked to carry out unannounced audits at tobacco company facilities.
Smuggled goods on rise
"That's being done on a regular basis, and the compliance is there, he said. "SARS wouldn't work with us if we were illegal."
Earlier, he told the committee that as a result of high taxes and over-regulation, legal sales of cigarettes in South Africa were declining steadily, while those of cheaper smuggled goods were on the rise.
Tobacco companies estimated that in Gauteng, smuggled goods made up 30% of the market, rising to 70% in informal settlements.
- SAPA