Stakeholders bemoan increase in excise, Ad Valorem tax on beer, others

The policy is capable of producing negative effects on investments, job-MAN

CPPE

By Joy Obakeye

Stakeholders in the manufacturing sector have lamented the massive increases in excise tax for 2023 and 2024 as contained in the newly released Fiscal Policy Measures for 2023 by the Federal Ministry of Finance, Budget and National Planning, following the approval by President Muhammadu Buhari.

They explained that the huge increase, which in some cases were up to 50 per cent on ad valorem and 75 per cent on specific duty rates, were over and above the already approved high increases of up to 50 per cent and 45 per cent respectively.

Reacting to this the Director General of the Manufacturers Association of Nigeria, Mr Segun Ajayi-Kadir, the increases were done without the government holding any consultation with affected manufacturers or carrying out an assessment of their impact on the firms in particular and the economy in general.

“We have earlier noted and forwarded our position on the excise duty tax to the government while it was being proposed in the 2023 Fiscal Policy Guidelines.

“We are again emphasising the fact that the proposed increase in the recently released 2023 guidelines i.e., on beer, wines and spirits, and tobacco has the potential to trigger unprecedented distortions in the affected industries as well as the entire manufacturing sector.

“The policy is capable of producing a negative effect on investments with a huge consequence on job retention in these industries.

“We, therefore, strongly recommend that government should maintain the status quo regarding the already government-approved excise duty increases on these items in the three-year roadmap as contained in the 2022 Fiscal Policy Measures. This was approved by Mr. President and implementation commenced on June 1, 2022.”

He explained that the unilateral action by the government despite the complaint and persuasion by stakeholders for the fiscal authority to consider the consequence on the industries, businesses and the economy as a whole is quite unfortunate.”

“MAN has carefully studied the newly released Fiscal Policy Measures for 2023 by the federal government, but noted that, “the increases in excise tax for 2023 and 2024 as provisioned in the said 2023 Fiscal policy, came as a surprise to us because, as a major stakeholder, MAN had actively participated in the deliberations on the proposal and presented various positions from its members across all sectors, especially those directly impacted by the proposed measures.”

Similarly, the Director and ChieffExecutive Officer of the Centre for the Promotion of Private Enterprise, [CPPE] Muda Yusfu, noted that some tax and import duty provisions in the 2023 Fiscal Policy Measures of the federal government would significantly hurt the economy and worsen the de-industrialization worries in the Nigerian economy.

“The construction and transportation sectors are also vulnerable to fiscal policy-induced downside risks. Some of the measures could exacerbate inflationary pressures which are detrimental to economic growth and manufacturing, construction and transportation sectors. It is a double whammy for economic players to contend with a regime of high import duty, prohibitive tax rates amid a depreciating currency.”

“Policy measures must seek to ensure a good balance between objectives of revenue generation, boosting domestic production, enhancing the welfare of citizens, promoting economic growth, deepening economic inclusion, facilitating job creation and recognizing societal ethos, beliefs and values. Specific reviews of the new fiscal policies are as follows:

He emphasised the fiscal policy measures imposed the following rates:
Non-Alcoholic Beverages, Fruit Juice, Energy Drink Excise: Duty of N10 per litre
Beer And Stout: 20% Ad valorem Tax; N75/Litre Wine Production: 30% Ad Valorem; N75/Litre Spirit and other Alcoholic Beverages: 30% Ad Valorem; N150/litre, “It should be noted that Ad valorem tax is based on the value of the product, which makes the impact even more injurious to industrialists.”

Stressing that sustaining current investments in these sectors would be a herculean task.

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“These policy measures failed to reckon with the multifarious challenges which industry operators are currently grappling with, some of which include the following.

Weak and declinconsumer purchase has power r. Naira exchange rate depreciation is taking a huge toll on the cost of production. High energy cost multiple taxes and levies are already being imposed on the industry players.

Risk to jobs in the sector and its extended value chain including millions of MSMEs in its distribution and marketing chain. Downside risk to manufacturing sector outlook in the Nigerian economy., he explained.