THE Manufacturers Association of Nigeria (MAN) has cautioned that the impact of the proposed excise duty regime for carbonated beverages may lead to a N1.9 trillion revenue loss in the country’s food and beverage sub-sector between 2022 and 2025.
The body warned that the excise duty on non-alcoholic beverages may lead to a 0.43 per cent contraction in output and about 40 per cent drop in total industry revenue in the next five years. This is aside the severe job losses and winding of many companies that may arise.
Recall that the House of Representatives Committee on Finance, had last August, resolved that it would amend the Finance Act to include levies on carbonated and non-carbonated drinks following a plea by the Comptroller-General of Nigerian Customs Services, Col. Hameed Ali (retd), that beverages companies should be made to pay levies.
But speaking on the sidelines of a recent event in Lagos, the Chairman, Fruit Juice Manufacturers Group of MAN, Fred Chiazor, explained that the new tax regime on beverages would lead to severe job losses and a drop in consumer purchasing power. He cautioned that the country would experience infrastructural deficit which would lead to high expenses and risk and continued security concerns
Giving an overview of the excise tax situation, Chiazor said the proposed “Excise Duty” will shrink the beverage sector’s contribution to the country’s gross domestic product (GDP) which he estimates to be about 35 per cent of the manufacturing GDP.
“The beverage sub-sector of the food and beverage sector will lose up to N1.9 trillion in sales revenue between 2022 and2025, indicating a 39.5 percent loss due to imposition of the new taxes. The government could lose up to N197billion in VAT, EIT and CIT revenue occasioned by drop in industry performance.
Total projected receipts is N81billion if excise tax is introduced on non-alcoholic beverages at N10 per litre. This excise gain does not compensate for potential revenue losses from Collective Investment Trust ( CIT), EIT, VAT and TET. The ripple effect will not only be seen in the beverage sector but will also have a huge impact on the sugar industry leading to loss of revenue, jobs and taxes paid by this sector,” he explained.
He, therefore, called on the government to suspend the planned re-introduction of excise on non- alcoholic beverages in 2022 and review in 2023 while working with the industry to carry out an in-depth impact assessment fashioning out the best approach that drives value for stakeholders.
However, Ali, who was represented at the event by Comptroller Monica Shaau, the Controller, Lagos Industrial Command, insisted that the implementation of the new excise duty would lead to a rise in revenue generation from excise duty collection.
“Bringing the carbonated non- alcoholic and alcoholic drinks under excise control will cushion the effects of the dwindling oil / import duty revenue occasioned by global economic response to effects of COVID-19,” he said.
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