South African Revenue Service Plans Track-and-Trace System to Curb Billions in Lost Tobacco Tax Revenue
The South African Revenue Service is preparing to introduce a track-and-trace system to recover billions of rands in lost tax revenue caused by illicit cigarette and alcohol markets. Up to 75% of cigarettes sold in South Africa are estimated to be illicit, costing the government more than R27 billion annually in uncollected taxes.
Excise duties now account for more than half the retail price of legally sold cigarettes. Despite these rising levies, government revenue has dropped sharply. South African Revenue Service data presented by the Finance Minister shows that revenue from tobacco and cigarette products fell from R13.4 billion in the 2015/16 financial year to R9.4 billion in the 2024/25 period.
Parliamentary Briefing Details Technology Rollout for 2027
National Treasury and the South African Revenue Service addressed the illicit trade crisis during a presentation to Parliament’s Standing Committee on Finance on 14 October 2026. Officials outlined difficulties in raising excise duties while the illegal market commands such a large share of sales. Since 2023, cigarette excise increases have been limited to inflationary adjustments.
The South African Revenue Service told Parliament that the proposed track-and-trace solution will be introduced publicly in the coming weeks. The initial rollout will focus on tobacco products during the second quarter of the 2027/28 financial year. South African Revenue Service Commissioner Johnstone Makhubu stated that the agency relies on technology and coordinated enforcement to disrupt fraud and cross-border financial crime.
Electronic Stamps Target Supply Chain Loopholes
Professor Keith Engel, chief executive officer of the South African Institute of Taxation, stated that electronic security markers on packaging could substantially reduce illegal trade. The technology functions as an electronic stamp, allowing authorities to monitor products from factories through the supply chain and verify excise payments.
Research by Oxford Economics previously estimated that South Africa lost R85.6 billion in potential value-added tax and excise duty revenue from illicit cigarette sales between 2019 and 2022. The cheapest illicit pack of 20 cigarettes sells for approximately R5, compared with roughly R37 for the cheapest legal pack. The minimum collectable tax on a legal pack is set at R27.12.
Frequently Asked Questions About the Track-and-Trace System
When will the South African Revenue Service implement the track-and-trace system?
The initial rollout focusing on tobacco products is expected during the second quarter of the 2027/28 financial year, following a public introduction in the coming weeks.
How much revenue has South Africa lost to the illicit cigarette market?
Oxford Economics estimated that South Africa lost R85.6 billion in potential value-added tax and excise duty revenue from illicit cigarette sales between 2019 and 2022.
What is the price difference between legal and illegal cigarette packs?
The cheapest illicit pack of 20 cigarettes can cost as little as R5, while the cheapest legal pack costs approximately R37.
Related reading