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SADC Review – Study Into the Illicit Trade in Excisable Products with Particular Reference to Alcohol and Tobacco Products

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SADC Review – Study Into the Illicit Trade in Excisable Products with Particular Reference to Alcohol and Tobacco Products EU-FUNDED SUPPORT TO THE IMPLEMENTATION OF THE SADC PROTOCOL ON FINANCE AND INVESTMENT Contract No: 9 ACP SAD 014 Project Identification No: 9 ACP SAD 014-02 SADC Review – Study into the illicit trade in excisable products with particular reference to alcohol and tobacco products REPORT Presented to: SADC Secretariat in Gaborone, Botswana By Anthony Lester Elizabeth Allen GFA Consulting Group, Hamburg, Germany Published on the SADC Website: November 2012 s EU-FUNDED SUPPORT TO THE IMPLEMENTATION OF THE SADC PROTOCOL ON FINANCE AND INVESTMENT Your contact persons at GFA Consulting Group: Claudia Martens Contract No: 9 ACP SAD 014 Project Identification No: 9 ACP SAD 014-02 SADC Review – Study into the illicit trade in excisable products with particular reference to alcohol and tobacco products Report NOTE: THIS STUDY WAS COMMISSIONED BY THE SADC SECRETARIAT BUT THE REPORT DOES NOT NECESSARILY REFLECT THE VIEWS OR POLICIES OF THE SADC MEMBER STATES OR OF THE SECRETARIAT THE REPORT IS THE PROPERTY OF THE SECRETARIAT AND SHOULD NOT BE CITED OR PUBLISHED WITHOUT THE PRIOR PERMISSION OF THE SECRETARIAT OR ACKNOWLEDGEMENT OF ITS SOURCE1 Address: GFA Consulting Group GmbH Eulenkrugstraße 82 22359 Hamburg Germany Telephone: +49-40-60306-311 Telefax: +49-40-60306-119 E-Mail: [email protected] 1 Enquiries to: Head: Public Relations Unit, SADC Headquarters, Private Bag 0095 Gaborone, Botswana, Tel: + 267 395 1863; Email: [email protected] Website: www.sadc.int 2 s EU-FUNDED SUPPORT TO THE IMPLEMENTATION OF THE SADC PROTOCOL ON FINANCE AND INVESTMENT Table of Contents 1. EXECUTIVE SUMMARY ........................................................................ 9 2. SUMMARY OF RECOMMENDATIONS ............................................... 18 2.1 SADC “Toolkit” – for implementation by SADC ................................... 18 2.2 “Toolkit” of recommendations for implementation by individual SADC countries ............................................................................................ 20 3. BACKGROUND AND CONTEXT ......................................................... 22 4. CONDUCT OF THE REVIEW ............................................................... 23 4.1 Chronology ......................................................................................... 23 4.2 Definition of illicit trade ........................................................................ 24 4.3 Responses from SADC Member States .............................................. 24 4.4 Country visits ...................................................................................... 25 4.5 Excise regimes across SADC ............................................................. 26 5. GLOBAL PICTURE .............................................................................. 27 5.1 A global problem ................................................................................. 27 5.2 General background to the problem .................................................... 27 5.3 Globally recognized contributory factors to existence and growth of illicit trade in alcohol and tobacco products................................................ 28 6. FINDINGS ............................................................................................ 29 6.1 Regional overview .............................................................................. 29 6.2 Tax policy related issues .................................................................... 29 6.2.1 Tax rate increases do not necessarily result in additional revenue or decreased consumption ................................................. 29 6.2.2 Tax structures, rates and affordability .............................................. 30 6.2.3 Clarity and adequacy of tax legislation and guidance ....................... 32 6.2.4 Working with stakeholders ............................................................... 33 6.2.5 Working with other public sector stakeholders ................................. 34 6.3. Administration policy .......................................................................... 34 6.4 Supply chain control ........................................................................... 35 3 s EU-FUNDED SUPPORT TO THE IMPLEMENTATION OF THE SADC PROTOCOL ON FINANCE AND INVESTMENT 6.5 Control of taxpayer compliance .......................................................... 35 6.6 Enforcement ....................................................................................... 36 6.7 Reducing demand .............................................................................. 36 6.8 Modernization and E-Facilities ............................................................ 37 6.9 General ............................................................................................... 37 7. CONCLUSIONS ................................................................................... 37 8. RECOMMENDATIONS ........................................................................ 38 8.1 A SADC Strategic Approach ............................................................... 38 8.1.1 A regional approach to excise taxation ............................................ 41 8.1.3 A regional approach to data quality and its use in monitoring excise .............................................................................................. 46 8.1.4 Regional partnerships with industry and with trade associations ...... 46 8.1.7 The WHO Global Alcohol Strategy ................................................... 49 8.1.8 The urgent need for a regional community transit system ................ 49 8.1.9 The need for more efficient and effective border controls ................. 50 8.1.10 The need for more robust controls of wholesale and retail outlets ........................................................................................... 51 8.1.11 The urgent need for an effective mutual assistance process across the region .......................................................................... 51 8.1.12 Improve excise control and enforcement ....................................... 52 8.1.13 The need for urgent development of excise guidelines to improve standards of control of excise goods ................................ 52 8.1.14 A long-term plan for harmonisation of taxation on excisable products ........................................................................................ 53 8.1.15 Capacity building ........................................................................... 53 8.2 “Toolkit” for SADC Member States ...................................................... 55 8.2.1. Developing a strategic approach ..................................................... 57 8.2.2 Anti-corruption strategy .................................................................... 57 8.2.3 Know the “enemy” ............................................................................ 58 8.2.4 National outcome based performance targets .................................. 59 4 s EU-FUNDED SUPPORT TO THE IMPLEMENTATION OF THE SADC PROTOCOL ON FINANCE AND INVESTMENT 8.2.5 Develop an enforcement strategy .................................................... 59 8.2.6 Enforcement - Excise goods in transit and for export ....................... 60 8.2.7 Enforcement – A “Track and Trace” system ..................................... 60 8.2.8 Enforcement - Mutual Assistance .................................................... 62 8.2.9 A balanced evidence-based tax policy ............................................. 62 8.2.10 Quality and completeness of data available ................................... 63 8.2.11 Administrative policies ................................................................... 64 8.2.12 Effective modern excise legislation and regulations ....................... 65 8.2.13 Limit warehousing facilities ............................................................ 66 8.2.15 Encourage voluntary compliance ................................................... 67 8.2.16 Fiscal markers versus unique digital identifiers .............................. 68 8.2.17 Offences, penalties and a functioning judiciary .............................. 68 8.2.18 Capacity and capability .................................................................. 69 8.2.19 Embrace ICT modernization .......................................................... 70 8.2.20 Develop national partnerships ........................................................ 70 8.2.22 Tackle demand as well as supply .................................................. 72 8.3 Early actions for both SADC and Member States ............................... 72 8.3.1 Provide an easy electronic cross region checking facility on the taxpayer details of excise operators including transporters .............. 72 9. RAISING AWARENESS ...................................................................... 73 10. VALIDATION AND WAY FORWARD ................................................ 73 10.2 Way forward – Member States’ Toolkit ............................................. 74 10.2.1 Develop a national strategic approach to tackling illicit trade.......... 74 10.2.2 Tackle corruption ........................................................................... 74 10. 2.3 Data quality ................................................................................... 74 10.2.4 Excise modernization ..................................................................... 74 10.2.5 Capacity Building ..........................................................................
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