SARS is coming after these targets in South Africa hard
The South African Revenue Service (SARS) is setting its sights squarely on the illicit economy in South Africa, which it says has grown to staggering levels.
The revenue service noted that the illicit economy accounted for only 4% of South Africa’s GDP in 1994, but has since grown to anywhere between 10% and 15% of the total economy.
Based on 2024 figures, this equates to illicit activity of R570 billion to R880 billion.
SARS commissioner Edward Kieswetter said this figure is unacceptably high, and places a severe burden on the national.
“This activity must be met with swift and determined efforts to reverse its impact,” he said.
The illicit activities in tobacco and cigarettes, alcohol, fuel and fuel adulteration, counterfeiting, illegal mining, and the smuggling of gold and other minerals are all contributors to this economy.
“SARS will continue to work to eliminate valuation fraud and identify unexplained wealth while integrating the informal economy into the broader tax framework,” the commissioner said.
“The success of our country depends on our efforts to decisively deal with the scourge of the illicit economy. Let it be said that we have and will continue to incessantly fight against this scourge that weighs down our economy.”
One of the key targets within the illicit economy that has come into focus in recent months is the illicit tobacco economy.
In October, commenting on the proposed Tobacco Products and Electronic Delivery Systems Control Bill, SARS flagged a R40 billion gap in tax collection from the legitimate tobacco sector since the end of the Covid-19 pandemic.
SARS noted that the prohibition on smoking put in place during the COVID-19 pandemic by the South African government significantly altered the licit and illicit parts of the tobacco sector.
This pushed traditional crime cartels, syndicates and gangs into becoming involved in the illicit cigarette trade, it said.
Citing three different research papers, the revenue service pointed to the illicit tobacco industry in South Africa being between 60% and 75% of the entire sector, with tax losses between R51 billion and R84 billion.
Syndicates ballooning, investing and diversifying
However, it warned that the rapid scaling up of the black market for tobacco also emboldened syndicates and mafias to start getting involved and “invest” in other illicit sectors.
This “diversification” has spread to mining and refinery, property development, and it has also seen these syndicates “invest” in other countries such as the United Kingdom, the UAE, and in central and southern Africa.
Worse still, “foreign cartels and syndicates (have) developed relationships with local cartels and syndicates and entered the South African market.“
SARS said that syndicates have formed new relationships with money laundering channels, illicit financial flows and related “service providers”, and many of these channels are rooted in the illicit tobacco sector.
The revenue service noted that some tobacco syndicates had become money laundering facilitators themselves due to the inordinate amounts of cash they had on hand.
Despite the growth of the illicit economy, SARS has recorded successes against these criminal elements, which it now hopes to ramp up and accelerate.
In its 2024/25 annual report, the revenue service pointed to its syndicated tax and customs crime interventions yielding R30 billion in revenue recovery and collapsing four illicit financial flow schemes.
This was about 10% of the R300 billion in compliance revenue the taxman collected that year.
SARS has also disrupted specific illicit industries, including gold, fuel, and smuggled alcohol (ethanol).
Enforcement actions have included search and seizure operations, preservation applications, the repatriation of foreign assets, tax inquiries, and civil actions.
Specific to Customs, joint operations resulted in 10,142 seizures valued at R6.3 billion, 281,330 inspections valued at R1.3 billion, and 1,477 post-clearance audits with a 56% success rate.
The four illicit schemes the taxman dismantled included two involving oil majors selling fuel to local entities without including duties and levies, under the pretence of export.
This resulted in the collection of R763.7 million and settlement proposals totalling R2.7 billion.
There was also a scheme that involved the illicit adulteration of fuel, where entities were adulterating diesel with paraffin, causing a R3 billion loss to the fiscus.
In this case, assets, equipment, and products were detained, and criminal cases were initiated.
The final scheme dismantled by SARS was for VAT fraud and Illicit gold trade, where the tax service recovered R6.1 billion in revenue from fraudulent claims.
This included halting R1.9 billion in VAT refunds and preventing R2.2 billion in fraudulent claims.
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