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Sunday, January 23, 2022

FG introduces N10 per litre tax on carbonated drinks as MAN kicks against it

The Federal Government has announced the introduction of excise duty of N10 per litre on all non-alcoholic, carbonated and sweetened beverages in the country.

The charge is part of a new policy introduced in the Finance Act which was signed into law by President Muhammadu Buhari on December 31, 2021, alongside the 2022 Appropriation Bill.

Excise duty refers to a form of tax imposed on the production, licensing and sale of goods. This was disclosed by the Minister of Finance, Budget and National Planning, Zainab Ahmed, during the public presentation and breakdown of the 2022 budget held on Wednesday, January 5, 2021, in Abuja.

What the Minister of Finance is saying

Ahmed in her statement said that the new sugar tax was introduced to raise excise duties and revenues for health-related and other critical expenditures in line with the 2022 budget priorities.

She pointed out that the new policy is aimed at discouraging excessive consumption of sugar in beverages, which contributed to diabetes, obesity and other diseases adding that the Finance Act had also raised excise duties and revenues for the health sector.

The Minister said, “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.”

However, according to a report by Punch, the Manufacturers Association of Nigeria (MAN) has warned that a new tax imposed on carbonated drinks would be counter-productive.

MAN had commissioned a report detailing the effects of reintroducing excise duty on carbonated drinks and warned that it would be counterproductive and lead to revenue loss for the government.

The report, titled ‘key considerations against excise on non-alcoholic beverages’, projected that the government might collect N81bn revenue from excise duty on carbonated drinks between 2022 and 2025, but lose N197bn within the same period from other taxes, such as Value Added Tax and Company Income Tax from the manufacturers of soft drinks.

The report added that introducing excise duty would cause the beverage sub-sector of the food and beverage industry to lose up to N1.9tn in sales revenue between 2022 -2025, due to the imposition of the new taxes with simultaneous adverse effects on jobs and supply chain businesses.

What you should know

In a related development, the federal government had announced that it would charge offshore companies providing digital services to local customers in Nigeria a 6% tax on turnover as provided in the 2021 Finance Act.

The tax on digital services includes apps, high-frequency trading, electronic data storage and online advertising, adding “this is introducing a turnover tax on a fair and reasonable basis.”

The new policy is contained in Section 30 of the Finance Act which amended the provisions of Section 10, 31 and 14 on VAT obligations for non-resident digital companies.

Kaylie Pferten
A pilot of submersible crafts in a former life, now married to my husband David and writing about investment advice.

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