Tobacco companies slug it out

The Fair-trade Independent Tobacco Association (Fita) has slammed claims that their member Gold Leaf Tobacco Corporation (GLTC) was avoiding paying tax by selling their cigarettes at a cheaper rate online. GLTC, which manufactures cigarette brands such as Voyager, RG and Sharp, are now selling cartons of cigarettes online to their trade partners. The organisation has hit out at detractors, saying this move was simply a convenient way for small businesses to stock up and this could help smaller customers earn a living. According to Section 4(5) of the Tobacco Products Control Act, the sale or offer of sale of tobacco...
The Fair-trade Independent Tobacco Association (Fita) has slammed claims that their member Gold Leaf Tobacco Corporation (GLTC) was avoiding paying tax by selling their cigarettes at a cheaper rate online.

GLTC, which manufactures cigarette brands such as Voyager, RG and Sharp, are now selling cartons of cigarettes online to their trade partners.

The organisation has hit out at detractors, saying this move was simply a convenient way for small businesses to stock up and this could help smaller customers earn a living.

According to Section 4(5) of the Tobacco Products Control Act, the sale or offer of sale of tobacco products through the internet is prohibited, but this does not apply between tobacco manufacturers or importers and its trade partners, business partners, employees and shareholders.

Registering as a trade partner does not require any documentation, as one can easily register on the website and order large quantities of cartons for as little as R225 each, which can be delivered nationwide.

It is this ease of the process which presumably constitutes a contravention of the Act, as details are not verified, including the required legal age of 18, said Tax Justice South Africa's (TJSA) Yusuf Abramjee.

"TJSA registered as a retail trade partner using bogus details that were never verified. GLTC then delivered a single carton of cigarettes to a residential address with no questions asked… GLTC makes no checks to verify the identify of their 'retail trade partners' or to establish that they are above the legal age of 18," Abramjee said.

"The sales invoice that arrived with our delivery was stamped 'CHECKED' but there isn't one single check done."

Abramjee also questioned if Gold Leaf was tax compliant, saying that selling their products at R22.50 per pack suggests that GLTC was not paying due taxes.

"Gold Leaf had dominated the market since the lockdown ban on legal sales. It is the duty of Fita and chairperson Sinenhlanhla Mnguni to investigate any wrongdoing by its most significant member," he said.

Fita responds

According to Fita, the online sales system was a method of convenience for assisting small businesses and entrepreneurs who make a living from selling cigarettes.

"Considering the increase in job closures and retrenchments that are a direct result of lockdown, Fita member GLTC has conceived a convenient method of servicing small businesses and entrepreneurs to make a living by trading cigarettes, which has been proven to be worthwhile consumer good to trade in," said Fita chairperson Sinenhlanhla Mnguni.

Mnguni strongly denied claims that the required taxes were not paid, challenging Abramjee and his organisation to provide evidence proving otherwise. He said the total tax was around R20.01 per pack, but the sale of cigarettes in cartons should be considered.

He said Fita would, over the next few days, engage with GLTC to ensure that their methods comply with the laws.

"We also reject any assertions that a Fita member is not paying the requisite taxes from the sale of cigarettes. Should TJSA have evidence to the contrary, we kindly request them to provide us with the evidence of the same in order for our office to investigate," Mnguni said.

"TJSA paid to target Fita"

Fita has accused TJSA and Abramjee of being "obsessed" with Gold Leaf, saying the company is being "targeted by multinationals" in a battle for market share.

Describing TJSA as an "astroturfing" organisation, Fita said there ias a masking of sponsors behind statements made by TJSA, which made it seem it originated and supported by grassroots participants.

They accuse multinationals of attempting to divert the attention of law enforcement agencies and the public towards their competitors due to a shrinking market share, since consumers are now more price conscious than brand conscious.

Mnguni says there has been evidence that multinational tobacco companies have influenced state officials to direct their efforts to deflect attention from bigger losses to the tax coffers, such as a multinational company which allegedly owes the state R2 billion in corporate income tax.

"Fita has been on record in this regard for some years now with little response by law enforcement agencies.

"TJSA, for reasons only known to it, seems determined to turn a blind eye to the wrongdoings of multinational cigarette manufacturers and has only been seen to shift its focus to local independent cigarette manufacturers," Mnguni said.

rorisangk@citizen.co.za

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