Industrial Growth: MAN Raises Alarm Over New Tax On Soft Drinks

Following the Federal Government’s introduction of N10 excise duty per litre on all non-alcoholic, carbonated and sweetened beverages via the Finance Act, the Mansur Ahmed led Manufacturers Association of Nigeria (MAN) has warned that the new tax will have negative consequences on production, employment and the entire economy.

Excise duty is a form of tax imposed on the production, licensing and sale of goods.

The Minister of Finance, Budget and National Planning, Zainab Ahmed, who announced the tax at the public presentation of the 2022 budget in Abuja said the new policy is part of the Finance Bill signed into law by President Muhammadu Buhari on December 31, 2021.

“There’s now an excise duty of N10 per litre imposed on all non-alcoholic and sweetened beverages. And this is to discourage excessive consumption of sugar in beverages which contributes to a number of health conditions including diabetes and obesity.  But it is also used to raise excise duties and revenues for health-related and other critical expenditures.  This is in line also with the 2022 budget priorities.” The Minister said.

The Manufacturers Association of Nigeria and economic experts have, however noted that additional excise duty on carbonated drinks would eventually lead to revenue loss for the government.

A recent report by MAN projected that government could raise about N81bn from the new tax in three years but would lose over N197bn from other taxes from the manufacturers, including Value Added Tax, within the same time frame.

“The introducing excise duty would cause the beverage sub-sector of the food and beverage industry to lose up to N1.9tn in sales revenue between 2022 -2025, due to the imposition of the new taxes with simultaneous adverse effects on jobs and supply chain businesses.” The report read.

According to The Director-General of MAN, Segun Ajayi-Kadir, the introduction of excise duty of N10 per litre on non-alcoholic, carbonated and sweetened beverages, despite its potential overwhelming negative impact is rather unfortunate.

He noted that the excise duty tax would affect the sub-sector, which has contributed significantly to the economy and tax revenues, despite the weakening naira, scarcity of forex, and the COVID-19 pandemic.

“The revenue aspirations of the government in introducing this excise may not be justified in the long run.   Let us look at it this way. The government is estimated to generate an excise tax of N81bn between 2022 and 2025 from the group. This will not be sufficient to compensate the corresponding government’s revenue losses in other taxes from the group. The policy could lead to salary reduction, loss of jobs, and general increase in prices of goods.” He pointed out.

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