The new tax on carbonated drinks announced on Wednesday by the Federal Government would be counter-productive, the Manufacturers Association of Nigeria has said.
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 report on the study titled: ‘Key considerations against excise duty on non-alcoholic beverages’, revealed that rather than contribute to the growth of the economy, such taxes would lead to huge revenue losses for the government.
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 approval of the 2021 Finance Ac whose provisions contain policy initiatives to boost revenue generation during the year.
Section 17 of the Finance Act, which amends Section 21, introduced N10 excise duty on non-alcoholic, carbonated, and sweetened beverages as a way of discouraging “excessive consumption of sugar in beverages which contribute to diabetes, obesity, etc.”
The Minister said the new ‘Sugar Tax’ was imposed to help raise excise duties & revenues for health-related & other critical expenditures in line with the 2022 Budget’s priorities to raise the share of non-oil taxes by the Nigeria Customs Service from N508.27 billion to N834.12 billion during the year.
But the manufacturers’ umbrella body said in a reaction that the policy by the government could result in massive cut in workers’ salaries, sack, and general hike in prices of goods.
Apart from the policy driving the affected products beyond the reach of the poor, the group said 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 report said 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.
The Director-General of MAN, Segun Ajayi-Kadir, who confirmed the report described as unfortunate the decision by the government to go ahead to introduce new excise duty announced on Wednesday, despite concerns expressed over its potential negative impact on the economy.
Ajayi-Kadir said as far as MAN was concerned, the new excise duty tax would negatively impact the food and beverage sub-sector, which has contributed significantly in taxes to the economy and, despite the debilitating effects of Naira devaluation, inadequacy of foreign exchange, and COVID-19 pandemic.
“The revenue aspirations of the government in introducing this excise duty may not be justified in the long run,” he said.
“The government expects to generate an estimated N81 billion from excise tax between 2022-2025 from the sub-sector. This will not be sufficient to compensate for the corresponding government’s revenue losses in other taxes from the sub-sector,” he added.
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