——– says it‘ll have unpleasant impact on employment
The Manufacturers Association of Nigeria ((MAN) has described the introduction of excise duty of N10/liter on non-alcoholic, carbonated, and sweetened beverages, despite its potential overwhelming negative impact as rather unfortunate.
MAN also expressed worry over the ripple effect on the introduction of the excise, despite strenuous evidence-based advice to the contrary, adding that this will have an unpleasant impact on employment, households, and consumers.
However, MAN noted that there is no doubt that the potential revenue gains are the basis for the introduction of this excise, saying it would appear that the goose that lays the golden eggs is being led to perdition.
While reacting to the introduction of N10 excise duty on carbonated drinks by the federal government, Director General of MAN, Segun Ajayi-Kadir said, the affected sub-sector, has contributed most significantly to the economy and taxes, despite the debilitating impact of Naira devaluation, the inadequacy of forex and the COVID-19 pandemic.
He said the food and beverage contributed the highest (38per cent) of the total manufacturing sector to the GDP! It comprises 22.5per cent of manufacturing jobs and generates more than a 1.5million jobs. So, this excise would certainly cast a sunset on this performance.
“Furthermore, recent studies have shown that Introducing excise on non-alcoholic beverages is likely to cause a 0.43per cent contraction in output and about 40per cent drop in total industry revenues in the next five years.
“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 N81billion 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.
“For instance, the corresponding effect of reduced industry revenue on government revenues is estimated to be up to N142bilion contraction in Value Added Tax (VAT) raised by the sector and N54bilion CIT reduction between 2022 to 2025. This is not to mention the potential negative impact on manufactures/supply chains.
“What is not realized by many of that excise begets high production costs which in turn adversely affect production levels and intimately result in dwindling profits. This will grossly impact the small and emerging business owners in the non-alcoholic beverage sector.
Nigeria is the 6th highest consumer of soft drinks but per capita consumption is low. Introducing excise will easily reduce production capacity causing manufacturers to struggle to meet investor commitments as well as cause investors to make investments to other countries,” he said.
Speaking further, Mr. Ajayi-Kadir maintained that a decrease in production levels or ability to purchase raw materials as a result of the introduction of excise tax will result in reduced profits for the supply chain players in the non-alcoholic beverage sector.
As seen from previous impact analysis, he said excise affects production outputs, revenues, and profits, adding that it causes companies to pursue cost-cutting measures to reduce the effect of diminishing revenue and profits by reducing employee salaries or retrenchment.
He said, “Presently, the country’s unemployment rate is at about 33.3 per cent, and at this rate is projected to further increase. A further cut in jobs for an industry that employs over 1.5 million people, directly and indirectly, will worsen the unemployment position in the country resulting in an increase in social vices and moral decadents.
“There will certainly decline private households/ consumers purchasing power as they earn income mostly by supplying labor to the industry and from owning a share in industry capital. Households in turn use this earned income to purchase food, shelter, and products from this manufacturing industry. An introduction of an additional tax will cause manufacturers in a bid to offset tax and maintain profit raise prices of their products to higher rates thus shifting tax incident to consumers,” he said.
