SA losing US$62 billion a year due to illicit financial flows

Published: 12 September 2023

South Africa is losing more than US$62 billion a year because of illicit financial flows (IFFs), which could be used to fund the building of schools, hospitals and safer roads.

This was highlighted at a conference on increased illegal trading in automotive components, at the Automechanika even in Johannesburg.

Tyre Import Association of South Africa (Tiasa) chairperson and MD of Treadzone Charl de Villiers said a pilot study by the United Nations Convention on Trade and Development (Unctad) focused on measuring tax and commercial IFFs, revealed that South Africa is losing out on US$21,9 billion per year in inward flows and US$40,9 billion in outward flows.

These inward flows are being lost because of misdeclarations (either on purpose or by mistake), undervaluation of invoices, tax evasion, round tripping and many other things, De Villiers told a conference hosted by the Tyre, Equipment, Parts Association (Tepa) at Automechanika last week.

De Villiers said the majority of outward flows that are being missed involve the minerals sector, with "the mining guys playing games with the values they export".

He said misdeclarations in the tyre sector involve people selecting non-tax tyre codes and importing tyres as rice or wheelchair tyres, which do not attract duties.

De Villiers referred to an example of tyres being imported via Namibia as wheelchair tyres when in fact they were ultra-high-performance tyres.

He said Tiasa is part of a SA Revenue Service (Sars) forum where they share information and knowledge, but highlighted that Sars "don't understand the data that they see" and do not know what the different tyre sizes mean.

"So zero tax is being paid, and they are also not paying the R2,30 (recycling) levy," he said.

SA Tyre Manufacturing Conference (Satmc) managing executive Nduduzo Chala echoed this point by highlighting two major risks — South Africa's port operations, and the misdeclarations that take place at the ports, and the lack of understanding of the tyre industry.
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