Lagos Chamber of Commerce and Industry (LCCI) and Nigerian Labor Congress (NLC) reject new federal excise tax of N 10 per liter on all soft, carbonated and sugary drinks .
Excise duty is a tax imposed on the manufacture, sale or consumption of certain selected products such as alcoholic beverages, tobacco and petroleum products. it is an indirect tax, forcing manufacturers or producers to recover their loss by increasing the price of their goods.
During the public presentation of the FGN 2022 budget approved last week, the Minister of Finance, Budget and National Planning, Ms. Zainab Ahmed said: “An excise tax of N 10 per liter is now imposed on all non-alcoholic, carbonated and sweet drinks. This is to discourage the excessive consumption of sugar in drinks which contributes to diabetes, obesity, etc.
“The new ‘sugar tax’ introduced also aims to increase excise duties and revenues for health-related and other essential expenses. It is in line with the priorities of the 2022 budget.
This new development was not well received by the LCCI and the NLC, the two organizations are asking the government to reconsider its decision because this newly imposed excise tax will have a negative effect on the economy. Remind the federal government of the two tire-making giants, Dunlop and Michelin, which have been forced to relocate to neighboring countries due to an epileptic power supply that has weighed on their production costs.
It is believed that a similar situation could arise, leading to the relocation of non-alcoholic and carbonated businesses to neighboring countries.
In a statement released last week, LCCI Director General Chinyere Almona said the newly imposed excise tax on carbonated and non-alcoholic drinks would have a ripple effect on demand and prices for affected products. that will affect domestic producers and result in job losses due to the potential reduction in production activities.
Chinyère said, “The federal government has announced that it will impose an excise tax of N 10 per liter on all sweetened non-alcoholic soft drinks to discourage excessive sugar consumption and increase income.”
“The immediate concerns are the likely increase in prices which can lead to lower demand and, consequently, job losses due to reduced production activities.
“The ban on imported drinks should be better enforced to protect domestic production from unfair competition in the face of the high cost of production in Nigeria. “
This policy will increase the price of soft drinks across the country and “Imposing immense hardship on ordinary Nigerians who easily ward off hunger with a bottle of soda and maybe a loaf of bread.”
Speaking further, the LCCI recommended an upward revision of the budget allocation to the country’s health sector.
“We recommend, however, that the revenues generated by these levies be used to improve the country’s totally inadequate health infrastructure. The allocation to the health sector in the 2022 federal budget of N 463 billion is expected to be revised upwards to reach the region of the trillion naira invested in the sector over the next ten years.
“And beyond levying taxes on soft drinks to force a reduction in consumption, we urge various public health agencies to regulate the production of sugary drinks to reduce their negative effect on human health.” The room said.
According to Chinyere, the adoption of the new excise tax is inevitable if the federal government insists on applying the new “Sugar tax”. She said, “If the president insists that he wants it, we must force him”, she said.
In a statement released by NLC and signed by Comrade Ayuba Wabba, the union said its concern over the new excise tax is the mass hunger that would result from the potential increase in the retail price of soft drinks that will be beyond the reach of many Nigerians.
The union further explained that the increase in the price of non-alcoholic and carbonated drinks would cause some Nigerians to resort to consuming substandard and unhygienic beverages as a substitute for carbonated drinks, which would expose them to serious health problems. .
If this happens, it will nullify the federal government’s goal of discouraging overconsumption of sugar and controlling obesity.
Full NLC Statement:
On December 31, 2021, President Muhammadu Buhari promulgated the finance law. Some of the provisions of the finance law provide for the imposition of excise duties on locally produced non-alcoholic, carbonated and sweet drinks.
The reason given by the government for this decision was to discourage the consumption of sugar by Nigerians, as it has led to an increase in obesity and diabetes. In a letter dated November 27, 2021, the Nigerian Labor Congress wrote to the President and Commander-in-Chief of the Armed Forces of Nigeria, President Muhammadu Buhari, the GCFR and the leaders of both chambers of the National Assembly, pleading for that the government suspend the implementation of excise duties on non-alcoholic, carbonated and sweet drinks.
Congress has provided a number of very compelling reasons why the government should not go ahead with the decision to impose new taxes on non-alcoholic beverages. One of the reasons we put forward was that the reintroduction of excise duties on non-alcoholic, carbonated and sugary drinks will impose immense hardship on ordinary Nigerians who easily stave off hunger with a bottle of soda and maybe a loaf of bread.
Our concern is the mass hunger that would result from any increase in the retail price of soft drinks due to the imposition of excise duties as its price would be beyond the reach of many Nigerians. Congress was also alerted by the complaint from non-alcoholic drink manufacturers in Nigeria that the reintroduction of excise duties would lead to a very sharp drop in sales, a forced reduction in production capacity and a certain decline in investments with certainty. job losses and possibly closure of manufacturing plants.
Nigerians will recall that this was also the complaint from tire companies such as Dunlop and Michelin, which was ignored by the government until the two companies moved to neighboring Ghana. A similar situation is playing out in the soft drink manufacturing sub-sector. The government should be careful.
With 38% of the total manufacturing output in Nigeria and 22.5% representation share of the entire manufacturing sector in Nigeria, the food and beverage industry is the largest industrial sub-sector in our country. . The food and drink sub-sector has generated N202 billion naira in VAT in government coffers over the past five years, N7.3 billion in corporate social responsibility, and created 1.5 million decent jobs both directly and indirectly.
It is therefore undeniable that the industry is a goose that lays golden eggs that must be kept alive. The health reason put forward by the government to justify the reintroduction of excise duties seems altruistic. Yet we do not understand why the government has not imposed excise duties on sugar itself as a product rather than on soft drinks.
The truth is that a further increase in the retail price of soft drinks would expose more Nigerians to serious health problems, as many people would resort to substandard and unhygienic drinks as a substitute for soft drinks.
The call for rescinding the reintroduction of excise duties on non-alcoholic beverages becomes even more compelling when the expected immediate revenues expected from the policy are weighed against the potential long-term loss to manufacturers and the government. . The drinks sub-sector will lose 40% of its current turnover.
This translates into a loss of 1.9 trillion naira. While the government will only make projected total revenue of 81 billion naira from the proposed reintroduction of excise taxes. The government is also at risk of losing 197 billion naira in VAT, corporate income tax and higher education tax due to the expected decline in overall industry performance if the excise duties are applied as expected.
In view of the above, we ask the National Assembly to quickly modify the articles of the finance law which reintroduced excise duties on non-alcoholic and carbonated drinks. We also call on the government to expand COVID-19 stopgaps and support incentives for the food and beverage industry to cushion the shock and bleeding the industry is trying to recover from.
Finally, we call on the government to engage the employers in the sub-sector and unions in sincere discussions on other options that can provide a mutually satisfactory and win-win solution to this problem. We hope that the current situation cannot degenerate into a breakdown in industrial relations in the sector and in the country in general.
Comrade Ayuba Wabba, mni