NLC President Comrade Ayuba Wabba
Business & Economy - News - January 7, 2022

Labour rejects new tax on local soft drinks; says it’ll fuel mass hunger, hardship

By Bassey Udo

The Nigeria Labour Congress (NLC) has rejected the new tax on locally produced soft drinks announced on Wednesday, saying it would fuel fresh mass hunger among workers and poor Nigerians.

Reacting to the latest policy on N10 excise duty on every litre of non-alcoholic, carbonated, and sweetened beverages in the country, Labour said this would impose immense hardship on ordinary Nigerians who often resort to a bottle of soft drinks and some quick snacks to keep body and soul together on a daily basis.

On Wednesday, while presenting the detailed highlights of the approved 2022 Appropriation Bill to the media and civil society groups in Abuja, the Minister of Finance, Budget, and National Planning, Zainab Ahmed, announced the introduction of N10 excise duty on every litre of non-alcoholic, carbonated, and sweetened beverages.

The Minister said the duty, which is part of the newly approved 2021 Finance Act, was part of the government policy initiatives to boost revenue generation during the year.

Also, she said the new ‘Sugar Tax’ was one of the ways the government was trying to discourage excessive consumption of sugar in beverages, which, it said, contributes to diabetes, obesity, and other health issues among the people.
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The NLC President, Ayuba Wabba, said prior to the signing into law of the Finance Act 2021 by President Muhammadu Buhari on December 31, 2021, Labour frowned at some of its provisions, which it considered not in the interest of the poor masses.

Wabba said one of such provisions in the Finance Act was the imposition of fresh excise duties on locally produced non-alcoholic, carbonated, and sugary drinks, although government said it was to discourage the consumption of sugar by Nigerians.

The government said soft drinks contributed to the upsurge of cases of obesity and diabetes in Nigeria.

Consequently, Wabba said the NLC, in a letter dated November 27, 2021, to the President appealed to him and the leadership of the National Assembly for the suspension of policy till further notice.

In the letter, Wabba said Labour gave government reasons why it should reconsider the decision to reintroduce the policy.

He said the NLC argued that the “re-introduction of excise duties on non-alcoholic, carbonated and sugary drinks will impose immense hardship on ordinary Nigerians who easily keep hunger at bay with a bottle of soft drink and maybe a loaf of bread.

“Our concern is the mass hunger that would result from the slightest increase in the retail price of soft drinks owing to imposition of excise duties, as the product would be priced beyond the reach of millions of ordinary and poor Nigerians.”

Besides, the NLC President said Labour was alerted by the complaint by the manufacturers of soft drinks in Nigeria that the re-introduction of excise duties on their products would havs dire implications on their sector.

Apart from leading to a very sharp decline in sales, and forced reduction in production, Labour said the manufacturers lamented that the policy would negatively impact investments, in view of the direct consequences of job losses and possibly shut down of their manufacturing plants.

The new tax policy, the NLC pointed out, was akin to the complaint by two tyre manufacturing companies, Dunlop and Michelin, whose complaints were ignored by the government, resulting in their relocated their operations to neighbouring Ghana.

Wabba warned that a similar scenario was playing out today, with the soft drinks manufacturing sub-sector the target.

“Government should pay attention ro them. With 38% of the entire manufacturing output in Nigeria and 22.5% share representation of the entire manufacturing sector in Nigeria, the food and beverage industry is the largest industrial sub sector in our country.

“The food and beverage sub-sector has generated to the coffers of the government about N202billion as VAT in the past five years, N7.3 billion as Corporate Social Responsibility and has created 1.5 million decent jobs both directly and indirectly.

“There is thus no gainsaying the fact that the industry is a golden goose that must be kept alive,” he said.

Despite describing as altruistic thehealth reason government gave for re-introducing excise duties, Labour expressed conern why the excise duties was not placed on sugar itself as a commodity rather than on carbonated drinks.

“The truth of the matter is that additional increase in the retail price of carbonated drinks would put more Nigerians at risk of serious health challenges as many people would resort to consuming sub-standard and unhygienic drinks as substitutes for carbonated drinks,” Labour said.

While appealing to government to rescind the re-introduction of excise duties on non-alcoholic drinks, Wabba said it was even more compelling to reconsider the policy when the projected immediate revenue expected from the policy is far below the potential long-term loss to both manufacturers and the government.

In its estimation, Labour said the beverage sub-sector would lose about 40 percent of its current sales revenue as a result of the policy.

This, it said, would translate to a loss of about N1.9 trillion against a total projected revenue receipts by the government of only N81 billion.

In addition, Labour esrimates that the government stands to lose about N197 billion in VAT, Company Income Tax and Tertiary Education Tax as a consequence of expected downturn in overall industry performance should the excise duties was allowed to stand.

The NLC urged the National Assembly to speedily amend the sections of the Finance Act 2022 on the re-introduced excise duties on non-alcoholic and carbonated drinks.

To further strengthen the Food and Beverages sub-sector of the economy to continue contributing to the growth of the country’s economy, the NLC asked government to extend COVID-19 palliatives and support incentives to the industry.

This, it said, would help cushion the shock and haemorrhage that the industry was trying to recover from.

Labour also urged government to engage employers of labour in the sub-sector and organized Labour in sincere discussions on other options that could facilitate a mutually satisfying win-win solution on the issue.

“We hope that the current situation will not be allowed to degenerate into a breakdown in industrial relations in the sector and generally in the country,” the NLC warned.

On Thursday, the Manufacturers Association of Nigeria (MAN) also condemned the new tax, arguing that it would be counter-productive in the long run.

The association said its position was informed by the outcome of the study it commissioned on the impact of the reintroduction of excise duty on carbonated drinks in the country.

The Director-General of MAN, Segun Ajayi-Kadir, said the study he Director-General of MAN, Segun Ajayi-Kadir, revealed that rather than contribute to the growth of the economy, taxes on non-alcoholic beverages would lead to huge revenue losses for the government.

Aside from causing a massive cut in workers’ salaries, MAN said the new tax could also lead to the retrenchment of workers and general hike in prices of goods.

Again, the group said the policy would drive the affected products beyond the reach of the poor, as a result of a rise in price of the drinks with additional charge for Value Added Tax and other duties.

“The government might end up losing more than N197 billion from Value Added Tax and other duties between 2022 and 2025 against the expected revenue collection N81billion from excise duty on carbonated drinks.

“Also, the imposition of the new taxes could trigger over to N1.9trillion losses in sales revenue in the beverage sub-sector of the food and beverage industry for the period, with additional adverse impacts on jobs and supply chain businesses,” MAN said

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