At a time where the country looks forward to shoring up its revenue base with different innovative ways to do so, the tax administration must now tread carefully as a recent report has predicted a whopping loss of ₦1.9 trillion sales revenue in the manufacturing sector in just 3years.

This warning by the Manufacturing Association of Nigeria, MAN is a response to the recent plans by the tax administration to introduce a policy of Excise Duty on non-alcoholic drinks with producers of Carbonated Beverages as a focal point.

To further expound on the potential damages this policy can inflict on the sub-sector and economy at large, the professional group also warned that the manufacturing sector is liable to contracting by 0.43 percent with the effect of worsened economic realities.

Expressing his displeasure recently on the proposed policy, Mr. Fred Chiazo, Chairman of the Fruit Juice Manufacturing Group of MAN, analysed that the move will frustrate the existing Federal Government’s Sugar Master Plan as the sugar industry will not be spared from this proposed tax regime as volumes of sales may likely to drop due to low demand.

With a 39.5% revenue loss in the carbonated industry in 3 years, the tax administrator is warned against the consistent tax increase in recent times as it is capable of discouraging compliance.

On the flip side, the expert further expressed that excise duty on the said items will jack up their prices with the possibility of also increasing sharp practices due to the quest of consumers to get cheaper alternatives.

In his words,

There is a real concern that the industry cannot cope with persistent tax increases. There have been multiple tax increases in recent times-excise duty was increased on alcoholic beverages in 2018 and Value Added Tax, VAT, was increased in 2020.

The beverage sub-sector of the Food and Beverage sector will lose up to ₦1.9 trillion in sales revenue between 2022 and 2025 indicating a 39.5% loss due to imposition of the new taxes with concomitant impact on jobs and supply chain businesses.

Excise will shrink the sector’s contribution to the Gross Domestic Products which is 35 percent of the manufacturing.

Manufacturers also grapple with other challenges such as forex restriction and currency devaluation. Introducing Excise on non-alcoholic beverages is likely to cause a 0.43% contraction in output and about a 40 percent drop in total industry revenue in the next five years.

MAN’s Recommendation

  • The Manufacturing sector has suggested that the planned policy to grow the revenue base has to be suspended until 2022. This according to the professional group is to be followed by a review in 2023 before final implementation.

Recall that,

  • In August, the Nigeria Customs Service, NCS had called for the re-introduction of excise duty on all drinks produced in the country.
  • This is not the first time government is proposing a collection of excise duty on soft drinks.
  • In 2019, Zainab Ahmed, the minister of finance, had announced that the government may introduce excise duty on carbonated drinks.

What you should know

  • Excise duty is a levy placed on the manufacture of locally produced goods.
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