Combating Illicit Trade in Clothing and Textiles
23 AUGUST 2013 – The South African Revenue Service (SARS) recognises the significant role the clothing, textile, leather and footwear sectors play in the South African economy.
SARS considers these as strategic economic sectors that require significant attention given its potential to create jobs and grow the domestic economy. Government has introduced incentive schemes (production incentives will be increasingly grant-based, thus reducing reliance on tax incentives) to boost manufacturing capacity and support job creation.
The industries face a number of constraints and obstacles which had a huge impact on the number of jobs that were lost across these industries over recent years. The key challenge confronting these industries and the South African economy relates to our global competitiveness. Although issues relating to the illegal flow of clothing and textiles across South African borders are important, they are but one part of the constraints and obstacles facing these industries.
In this regard, SARS wants to highlight the following—
- In order to be competitive across the entire value chain we have to improve, amongst other things, our design capability, we have to improve the technology we use, we have to become more productive, we have to improve how we market South African produced goods and we have to protect these strategic industries against the flow of illicit goods. In Customs, SARS has had a dedicated group that works closely with other stakeholders, including SACTWU, to seek new solutions. We are in the process of reviewing and modernising existing customs and tax regulations, the licencing of trading entities and a more effective penalty regime to deter non-compliance.
- A price-referencing system has been developed and has been built into the risk-engine of Customs to ensure that imports and exports that present high risk or goods that are priced out of the norm, are stopped for inspections. The price referring system is already impacting positively on our combined efforts to combat illicit trade.
- SARS is improving its ability on case selection to identify high risk transactions more accurately. This means an increased number of successful, focussed tax and customs interventions by SARS in these strategic industries.
- SARS will impose the most punitive measures possible in respect of its penalty regime on offenders, including, but not limited to maximum penalties, forfeiture and seizure of goods found to be in contravention of the law.
- As the authority responsible for issuing importer registrations SARS will withdraw such registrations for offenders. As the licencing authority, SARS will also withdraw licencing for warehouses and clearing agents in instances where facilitators are found to have conspired with offenders.
- The new Tax Administration Act has introduced additional investigative powers which will be utilised more frequently as non-compliant entities become more creative. By way of an example, SARS has recently executed a search and seizure on a high risk subject in Gauteng. In addition a tax inquiry is about to commence on the subject and related entities. With the assistance of the South African Reserve Bank (SARB), more than 90 entities have been identified as part of the scheme and included in the investigation. Apart from over 100 containers detained as part of this operation, SARS will now also institute proceedings to preserve the assets of these entities pending finalisation of the investigation. More such projects are underway.
- A set of new Customs Bills is currently before Parliament and will seek to strengthen the legal means available to SARS to execute its mandate in today’s environment. This process is taking into account identified needs around enforcement and investigations and the imposition of punitive measures by way of a predetermined penalty regime.
SARS remains committed to work with industry stakeholders including organised business, organised labour and NEDLAC to improve the maximum compliance with the law in these strategic sectors.