The South African Revenue Service (SARS) today unveiled a new fleet of 10 specially designed vehicles to combat the VAT and excise duty fraud through the mixing of paraffin and diesel. Mainly distillate fuel is mixed with kerosene (paraffin), or kerosene is mixed with a lubricity agent (usually base oil) to produce an end product sold on the local market as a substitute for distillate fuel.
This illegal practice of mixing diesel and paraffin has, over the years negatively impacted on revenue that SARS is mandated to collect for the national government. Through the illegal mixing paraffin and diesel by unscrupulous vendors, the fiscus loses duty or levy of 3,817c per litre and 79,1c per litre. The South African Petroleum Industry Association (SAPIA) estimates a loss of revenue to government of approximately R300 to R500 million per annum due to the illegal mixing of fuel.
To combat the illegal substitute of diesel, the Customs and Excise Act was amended to make it compulsory for manufacturers and importers of paraffin to blend the chemical tracer marker in paraffin and other specified duty free solvents. The marker is a specifically formulated chemical that is added to paraffin in small quantities (a few parts per million), but is still detectable even when diluted twenty-fold.
The 10 specially designed vehicles unveiled today will therefore bolster the capacity of SARS Road Fuel Testing Unit (RFTU) to enforce the amended Customs and Excise Act. Established in March 2000, the unit consists of specialist investigators who have the powers to investigate non-compliance with section 37A of the Customs and Excise Act. In this regard, SARS investigators have the powers to conduct roadside tests (that is roadblocks), take samples, report on the sample taking, and to submit such samples to laboratories for further analysis.
To date, the RFTU has made its presence felt in the market and has registered a number successes. By the end of 2000/2001 financial, there was a tremendous drop in paraffin sales and an increase in diesel sales as a direct result of efforts made by the RFTU to clamp down on the illegal mixing of paraffin and diesel. During the same period, there has been a dramatic reduction in paraffin demand and increases in diesel demand found in certain categories of consumer whose practices have long concerned SARS. These include the Agriculture and Road Hauliers.
During this period the sale of Diesel increased by 307,485,661.00 litres and revenue collection had also increased by R407, 604, 094.96.
Random testing of diesel fuel in the bulk storage tanks of wholesalers, resellers, retailers and consumers were conducted by the RFTU. Several offenders were caught using substitute fuels. These include farmers, transport companies and service stations. All those caught were penalised with about twenty criminal cases opened with the South African Police Service.
Consumers found with marked fuel in the tank of their cars, trucks, tractors or mine locomotives are similarly liable to prosecution and payment of the penalties in terms of the Customs and Excise Act, unless they are able to prove that they are unsuspecting victims of efforts by their suppliers.
ISSUED BY THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE
PRETORIA