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Stakeholders caution against further taxes on consumer goods

By Helen Oji, Lagos, Collins Olayinka and Anthony Otaru, Abuja
18 November 2022   |   4:32 am
The purpose of the proposed finance bill 2023 fiscal year should not be about mobilis0ing more resources for the government but promoting the health of Nigerians and boosting the manufacturing sector.

…Manufacturers insist policy may lead to business collapse, job loss
…World Bank backs move

The purpose of the proposed finance bill 2023 fiscal year should not be about mobilis0ing more resources for the government but promoting the health of Nigerians and boosting the manufacturing sector.

This was the view of Industry stakeholders, as they increasingly argued against the proposed increase in taxes on manufactured goods and services.

Speaking at the Finance Bill 2022 stakeholders’ session yesterday, the World Bank Group threw its weight behind the proposed law, noting that there is the need to recognise engendering pro-health tax.

The modern role of the exercise is to internalize negative externalities of ‘harm goods’.It emphasised that increased excise taxes, leading to higher prices of commodities that are harmful to human health, is the way to go.

A hospital physician and former Coordinator of the Presidential task force on COVID-19, Dr Sani Aliyu observed that the planned introduction of a sugar and sweetened beverages tax in Nigeria is a welcome development.

“This is the right thing to do for three basic reasons. The first reason is that globally, we are faced with an epidemic of non-communicable diseases such as diabetes, hypertension, strokes and obesity. All of these are predisposed to cancers,” he said.

Aliyu added that about six per cent of Nigerians have Type 2 diabetes, which translates to more than 10 million people. He hinted that diabetes and strokes are the two topmost causes of disabilities among Nigerians.

He explained: “We also know that seven out of 10 of us will end up dying from one of these two conditions. Unfortunately, diet plays a major role as a driver of non-communicable diseases. 14 per cent of non-communicable diseases arise directly as a result of our dietary preferences. This law will help reduce consumption and boost the health status of Nigerians.”

The industry players argued that over-taxation will further pull down production, stressing that the best option is for the government to stimulate production to achieve maximum tax collections across the board.

On his part, the Managing Director/Chief Executive Officer of Coca-Cola Nigeria, Alfred Olajide, urged caution in the implementation of the law.

He said as the government explores avenues for additional taxations to boost its revenues, it must take the survival of the food and beverages sub-sector into consideration and must move away from legislation that could be injurious to the manufacturing sector as a whole.

His words: “It is clear that the government needs revenue but a balance must be achieved so that the industry does not face challenges as from next year. This is within the context of the importance of food and beverages to the economy.

From the Gross Domestic Product (GDP) perspective, the sector represents about five per cent of Nigeria’s GDP. It has received about N200 billion in Value Added Tax and another N200 billion in company income tax in the last five years. More importantly, it employs about 1.5 million people in the food chain and more than 15 million people within the downstream impacts and upstream impacts of employment it generates.”

He stated that Sugar manufacturers, beverages, cement, textile just to mention a few have all stories to tell on current challenges facing the sector,

‘’The fundamental assumption is that if there are increases, the impact of trade volume tends to lower investment, direct job losses and economic activities will be downplayed, if the companies collapse, the children of the workers will suffer.

‘’We have seen the decrease in market demand, excise duties have led to distortions here and there, although we are grateful for this engagement but we will insist that for whatever reason, increase in taxes will amount to collapse of our industries.”

Olajide urged the government to assess the benefits of the N10 (about US$0.02) per liter excise duty on all non-alcoholic and sweetened beverages and come out with data to support the claims.

Also speaking, Executive Director of Flourmills Plc, Sadiq Usman said the decision tends to contradict the government’s renewed 10-year national sugar master plan aimed at supporting self-sufficiency in sugar production.

According to him, with the 10-year investment plan, companies are required to plough back revenue from existing sugar companies into backward integration.

He expressed fear that the development may reduce the value of these companies in achieving the much needed backward integration and self-sufficiency in these products.

“We must reflect on what message we are trying to send across. There is a need for consistency in government policies to help companies make good investment decisions. These policies need to consider the impact on health, as well as contributions to GDP and job creation.

Corroborating the position of Alfred Olajide, Professor Pat Utomi said that any further increase in tax will make manufacturers pass the cost to consumers to swallow the pill.

Utomi who is a founding member of the Lagos Business School, explained that in an environment where cost increases, it means that such business itself will have received burden.

He noted: ‘’The mistake we keep making in my view is that, there is a lot of conversation that says the problem of Nigeria is not a problem of revenue but a problem of poor payment of taxes, the Ministry of Finance keeps making the point that the problem is that the country is not collecting enough taxes, this is to me, a fundamental mistake’’

‘’First and foremost, Nigeria is under-producing, the few that are produced are being over-taxed. What we need is to stimulate production, when we do that then many people will be engaged and as a result pay taxes but that over taxation will affect our industries negatively and bring more poverty to the citizens’’.

He said taxation is not the necessary answer to the nation’s economic challenges, ‘’We need to boost supply that is the core challenge facing the economy