The Manufacturers Association of Nigeria (MAN) has kicked against the federal government’s proposed 20 percent ad-valorem excise tax on non-alcoholic beverages.
At a meeting held recently in Lagos, operators in the carbonated soft drinks sub-sector of MAN said that such a move would spell doom for the soft drinks sector as the effect of the prevailing N10 per litre tax regime is already crippling the sector with its biting effects on their businesses.
The group, which accounts for 33 percent of manufacturers in Nigeria, said a study had shown the impacts of the prevailing N10 per litre excise tax effect between June and August 2022, revealing an eight percent revenue decline as a direct result of excise tax implementation.
It is projected that the decline will hit 25 percent by December 2022, if not reviewed.
The operators said the study excluded the cost of write-offs of products manufactured, which were excised but not sold.
“Most certainly, the additional 20 percent will not only kill the sector but result in the loss of revenue by the federal government and a consequential phenomenal loss of jobs by various layers of the Nigerian workforce,” the operators said in a position paper released at the end of the meeting.
During the meeting, the group said the manufacturing industry contributes 15 percent to the gross domestic product (GDP) of the Nigerian economy, while the food and beverage sector contributes five percent.
It added that with a payment of N202 billion to the government on value-added tax (VAT) and N207 billion in company income tax, an enormous amount that would be lost by the federal government if the sector is allowed to collapse, which will have a multiplier effect on infrastructural development and growth of the already troubled economy.
Quoting the National Bureau of Statistics (NBS), the association said the food and beverage division of the economy in the last five years generated 1.5 million jobs — both direct and indirect.
It said from 2020 to date, some companies in the sector have been striving to pay minimum tax, which is a pointer to the fact that the business climate is deteriorating, as the companies are finding it difficult to carry out their operations effectively.
MAN decried the devastating effects of the N10 per litre tax, saying that it has become burdensome with the high cost of operation in the country and its constituent elements.
According to the group, the tax is already having devastating effects on the end cost to consumers considering their poor economic condition.
They lamented that with an additional 20 percent tax, the collapse of the soft drinks sector was imminent.
MAN said it would be “catastrophic” as thousands of jobs could be affected and the ultimate aim of the government in collecting revenue completely defeated.
The group called for the suspension of the proposed tax by the federal government to forestall the collapse of the industry.