Excise duty on non-alcoholic drinks will cause job loss, inflation- Experts

Stakeholders have begun to react to the newly-introduced excise duty of N10 per litre on all non-alcoholic, carbonated, and sweetened beverages.

The manufacturers and an expert have expressed outright displeasure to the development.

It will be recalled that the  Minister of Finance, Budget and National Planning, Zainab Ahmed said the new policy introduced is in the Finance Act signed into law by President Muhammadu Buhari on Friday, 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 as she presented the 2022 budget in Abuja.

Speaking on the development,  the Director-General (DG) of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir said: “I would like to say that the introduction of excise duty of N10/litre on non-alcoholic, carbonated and sweetened beverages, despite its potential overwhelming negative impact is rather unfortunate.”

He stressed that  the excise duty tax would affect the sub-sector, noting that it has contributed significantly to the economy and taxes, despite the debilitating effects of naira devaluation, the inadequacy of forex, and the COVID-19 pandemic.

According to him, the government’s revenue aspirations might not be realised in the long run.

“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 2022-2025 from the group. This will not be sufficient to compensate the corresponding government’s revenue losses in other taxes from the group,” he stressed.

It noted that  the move might lead to employees’ salary reduction, retrenchment, and a general increase in prices of goods, the MAN boss said the excise duty might put the products out of the reach of the poor segments.

Also speaking,the Fiscal Policy Partner and Africa Tax Leader at PwC, Taiwo Oyedele, expressed concerns over the effects of the development on the manufacturing sector.

His words: “I will be more concerned about sectors like manufacturing because their cost is rising and they are not able to increase their selling prices because the purchasing power is low.

“If you impose a tax, because they want to survive, they have to cut down on employment and find a way to survive. In terms of inflation, when you impose maybe an excise tax, if the sector is able to pass it on to customers, it would be higher selling prices, leading to inflation.

“But if the products are very elastic, and you are afraid of losing the market, then you bear the costs and your margins will be low. If your margin is low, it means what you pay in company income tax will be less, and your shareholders will get less in dividends, affecting their own purchasing power as well. So, taxes, sometimes, have unintended consequences, which policymakers must always consider.”