the carbonated soft drinks sub-sector of the Manufacturers Association of Nigeria [MAN] raised the alarm over the Federal Government’s proposed 20% Ad-valorem Excise Tax on Non-Alcoholic Beverages which covers the widely consumed carbonated soft drinks [CSD] part.
During a meeting held recently in Lagos, the sectoral group stated that such a move would spell doom for the sector as the impact of the prevailing N10 per liter tax regime has already crippled the sector.
Soft drink makers said their profits fell by 8% between June and August 2022, as a direct implication of the implementation of the excise tax.
They estimate that the decline will hit 25% by December 2022 if unchecked. This does not include the cost of write-offs of products produced, excised but not sold.
Imminent threat: With the proposed 20% Ad-valorem tax introduction, the collapse of the soft drink market is imminent. This will be disastrous as thousands of jobs will be affected and will completely defeat the government’s goal of collecting revenue.
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- “It is most certain that an additional 20% will not only kill the sector but will result in loss of revenue to the Federal Government, and a consequent dramatic loss of jobs to various layers of the Nigerian workforce.,” the association said.
Important sub-sectors: According to the association, soft drinks manufacturers account for 33% of the entire manufacturing sector in Nigeria, contributing about 15% of Gross Domestic Product (GDP) in the Nigerian economy.
The manufacturers added that the food and beverage sector contributes about 5% of the country’s tax revenue, with a payment of N202 billion to the government in Value Added Tax (VAT), and N207 billion in Company Income Tax. This represents a huge amount that the government will lose if the sector is allowed to collapse.
They noted that the division of food and beverages in the economy in the last five years has created 1.5 million jobs throughout the country, directly and indirectly, and from 2020 until now, that some companies in the sector are trying to pay of the Minimum Tax, which is a point to the fact that the business climate is deteriorating, because companies are struggling to carry out their operations effectively.
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- “There is evidence that the current N10 per liter excise tax on non-alcoholic beverages is harming the sector as companies pay N10 (Ten Naira) for every liter of liquor produced, whether sold or not,” they said.
The consensus: Speaking at the meeting with one voice, the sectoral leaders decried the disastrous effects of the N10 per liter tax, which has become heavy on the high cost of operation of the country and its elements. This has a detrimental effect on the final cost of consumers, considering their poor economic situation; an additional 20% will surely kill the sector.
Therefore, they called for the suspension of the excise tax proposed by the Federal government to prevent the collapse of the industry.
Confirming this position, Ekuma EzeCorporate Affairs and Sustainability Director, Nigerian Bottling Company (NBC) pointed out that the N10 per liter currently practiced has no impact on profitability for any of the members of the sectoral group.
He stated that since the introduction of N10 per liter Excise Tax, businesses in the sector have experienced an alarming decline, the average loss of volume and income is 10% between June to September 2022, and it is estimated that the decrease even more. increased to 25% by the end of the year.