The tax estimated to generate N81billion between 2022-2025 would not be enough to compensate the government’s revenue losses in other areas.
The Manufacturers Association of Nigeria (MAN) has kicked against the imposition of taxes on soft drinks.
The association warned that excise duty would lead to 0.43 per cent contraction in output and 40 per cent drop on industry revenues in the next five years.
The Minister of Finance and Budget Planning, Zainab Ahmed, had announced the imposition of N10 tax per litre on all non-alcoholic, carbonated and sweetened beverages.
Ahmed had stated that it was part of government’s efforts to prevent and discourage excessive consumption of sugar due to health concerns.
Meanwhile, Segun Ajayi-Kadir, the MAN Director General, revealed that beverages contributed 38 per cent of the manufacturing sector to the country’s Gross Domestic Product (GDP).
He explained that the sector boasts of 22.5 per cent of manufacturing and generated more than 1.5million jobs.
Ajayi-Kadir also warned of the effects of the tax on the masses, amid the “unpleasant impact on employment, households and consumers.”
The DG further noted that previous analysis, excise affects production outputs, revenues and profits revealed that “this causes companies to pursue cost cutting measures to reduce the effect of diminishing revenue and profits by reducing employee salaries or retrenchment.”
Ajayi-Kadir posited that the tax estimated to generate N81billion between 2022-2025 would not be enough to compensate the government’s revenue losses in other areas.
“The effect of reduced industry revenue on government revenues is estimated to be up to N142billion contraction in Value Added Tax (VAT) raised by the sector, and N54billion Corporate Income Tax reduction between 2022 to 2025.”
He further warned of the negative impact that manufacturer as well as supply chain would face.
“Nigeria is the 6th highest consumer of soft drinks, but per capita consumption is low. Excise duty will easily reduce production capacity causing manufacturers to struggle to meet investors”, Ajayi-Kadir cautioned.