Beverage sector: Battling fresh excise duty

The Federal Government’s decision to hike taxation on carbonated drinks in 2022, after the expiration of the three-year (2018 to 2020) approved excise duty rates for alcoholic beverages, including beer, stout, wines and spirits, is generating another rancour in the country’s manufacturing sector. TAIWO HASSAN reports

Structural challenges in the country’s macro-economic sphere had shown that it’s tough to manufacture products in Nigeria. It’s so worrisome that despite the constraints facing local manufacturers in the course of product manufacturing, the present government is turning a blind eye to considering their plights. Rather, the regime is even making life unbearable for them by introducing more taxes in a bid to shore up its revenue earning to the detriment of industries in the country that cannot cope with government’s new taxes. For instance, between 2018 and 2020, the administration of President Muhammadu Buhari unexpectedly took the country’s manufacturing sector, especially the alcoholic beverage, spirits and tobacco sub-sector of the economy by storm, introducing excise duty rates for alcoholic beverages, which cut across beer and stout, wines and spirits. According to the manufacturers of domestic wines and spirits sector of the economy, it is an over 500 per cent increase. In particular, the breakdown showed that beer & stout attracted N0.30k per centiliter (Cl) in 2018 and N0.35k per Cl each in 2019 and 2020, wines attracted N1.25k per Cl in 2018 and N1.50k per Cl each in 2019 and 2020, while N1.50k per Cl was approved for spirits in 2018, N1.75k per Cl in 2019 and N2.00k per Cl in 2020 respectively. However, the burdens over the excise duty rates introduced by government in the space of the three years is still telling on these beverage manufacturing companies’ bottom-lines as they are yet to recover fully. In a commando style, the same government recently announced that it was introducing another fresh tax on carbonated drinks in 2022. Consequently, with this, Nigerians should be expecting an increase in price of soft drinks come January 2022.

Finance minister’s stance

While speaking on the FG’s tax on carbonated drinks increase slated for 2022, the Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed at the public presentation and breakdown of the 2022 Appropriation Bill in Abuja recently that Nigerians should expect a possible upsurge in the taxation on carbonated drinks, which would lead to a price increase next year. She stated that it would be part of the additions in the 2021 Finance Act, which will take effect from January 2022. Ahmed said: “To further enhance independent revenue generation, government aims to optimise the operational efficiencies and revenue generation focus of government-owned enterprises.

“The introduction of new and further increases in existing prohealth taxes, for example, exercise duties on carbonated drinks – this is work in progress, but it will happen in the 2021 Finance Act.”

OPS’ position

Following the expected tax increase, members of the organised private sector are now in talks with the Federal Government to shelve the plan because of the multiplier effects it will bring on the manufacturers in the country’s beverage sector of the economy. In particular, some of these manufacturing firms affected by the 2020 expiration of the threeyear tariff slated by this same administration, beginning from 2018, definitely will be captured in this fresh one, thus, raising the alarm, that government is using tax to kill industries and industrial sector in its bid to rake revenue generation for gover-nance. The immediate past Director- General of the Lagos Chamber of Commerce and industry (LCCI), and the Founder/ Chief Executive Officer, the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said it was time for government to refrain from imposing new excise duties on the manufacturing sector. He said the sector was currently grappling with too many macroeconomic and structural challenges. According to him, the proposed re-introduction of excise duty on the production of soft drinks in the food and beverage segment of the economy is, indeed, ill-timed, insensitive and most inappropriate, giving the prevailing harsh economic and business conditions. Yusuf said that the move to re-introduce excise duties on a segment of the food and beverage industry by government should be put on hold by the National Assembly (NASS), saying it is not in tandem with the desire of Mr. President to create jobs and lift 100 million people out of poverty in 10 years. In his own submission, the Director-General of Manufacturers Association of Nigeria (MAN), Mr. Segun Ajayi-Kadir, said another fresh excise duty rate on the beverage sector would negatively impact on players in this sector’s production and bottom-lines with straits. The MAN director-general disclosed that the country’s manufacturing sector was already stretched beyond its limits amid multiple taxes from government and its MDAs, as well state governments and LGAs. Reacting to the adverse impacts of the three-year tariff under the approved excise duty rates for alcoholic beverages, beer & stout, wines and spirits, which expired in 2020, Ajayi- Kadir explained that alcoholic beverages, spirits and tobacco companies were still grappling with operational challenges from the government’s tax introduction. Ajayi-Kadir said that the tariff payment to government by the affected manufacturing firms had been a bitter experience in their production, combined with COVID-19. He said that many firms had been experiencing high cost of production and struggling to remain in business in the last three years.

Last line

OPS operators are concerned that manufacturing firms and, indeed, many investors, are going through tremendous economic stress at the moment, following multiple taxes they are paying for running businesses in Nigeria.


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