Tackling South Africa’s Illicit Cigarette Trade Could Boost Tax Revenue

South Africa is losing billions of rands every year due to the illicit cigarette trade—money that could be used to fund essential public services. According to Tax Justice SA (TJSA), cracking down on this rampant black market could generate the same level of revenue as a proposed VAT hike, without putting additional financial strain on already struggling citizens.

Illicit Cigarettes Cost South Africa Billions

The South African government is reportedly considering increasing VAT from 15% to 17%, a move that would generate an estimated R29 billion in additional tax revenue. However, a study by Oxford Economics found that in 2022 alone, South Africa lost R27.1 billion due to illicit cigarette sales.

That means that enforcing tax laws on tobacco could deliver nearly the same revenue as a VAT hike—without deepening the country’s cost-of-living crisis.

TJSA founder Yusuf Abramjee sees this as a clear and logical solution:

“Why should hard-working citizens be forced to pay more tax when the government is allowing criminal networks to rob the country of billions every year? Instead of punishing consumers, the authorities should prioritize shutting down the illicit cigarette trade.”

A Growing Shadow Economy

South Africa now has one of the world’s largest markets for illegal cigarettes, with at least two out of every three cigarettes sold evading tax.

Weak enforcement, corruption, and ineffective policies have allowed this underground economy to flourish. The South African Revenue Service (SARS) is losing billions that could be used to fund infrastructure, healthcare, and education.

TJSA argues that instead of reducing SARS’ budget, the government should strengthen its enforcement efforts by:

• Cracking down on rogue manufacturers
• Increasing law enforcement action against smuggling networks
• Installing CCTV cameras in all tobacco factories to monitor production and prevent tax evasion

The Case for Stronger Tax Enforcement

Abramjee and other experts believe the solution is straightforward: enforce existing tax laws.

“If the government wants to balance the books, it should start by ensuring everyone pays their fair share of tax—especially the criminals who are profiting at the nation’s expense.”

By taking decisive action against illicit cigarette trade, South Africa can recover billions in lost tax revenue, strengthen public finances, and ease the financial burden on ordinary citizens—all without raising VAT.

Would cracking down on illicit cigarette trade be a better solution than a VAT increase?

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