Experts have urged the federal government to enforce tax on defaulting individuals and companies instead of proposing additional 20 per cent Ad-Valorem Excise Tax on the Carbonated Soft Drinks [CSD] segment.
They believe the move to tax non-alcoholic beverages is a desperation on the part of government to generate revenue at all cost, no matter its implications.
The experts also decried the ongoing emotional campaign to string up the sugar angle by a subterfuge group known as the National Action on Sugar Reduction, allegedly concocted and purportedly sponsored by the government.
They said the sector aside paying the initial 10 per cent, is also paying other form of taxes to the federal and state governments, even though, they are struggling to survive, calling on government to focus its efforts more on tax defaulting companies and individuals.
Speaking on this development, a renowned economic analyst, Mr. Teslim Shitta-Bay, argued that, the advocates of the so-called sugar tax have argued that in 2007 Nigerians consumed 9ml per person, and in 2021 or fourteen years after, they consumed 14ml per person, representing a compound annual growth rate (CAGR) of 3.46 per cent, which is only slightly higher than the national population growth rate over the period.
“Nigerians consume 8kg of sugar per person per annum, which is below the prescribed World Health Organisations (WHOs) of 9.1kg per person and is significantly lower than the United Kingdom’s 30kg or the United State of America’s (USA) 46kg per person.”
Shitta-Bay, who also raised greater health concerns of the aftermath of the sugar tax, said, “Yes, health issue can be connected to economic development but in this case, there is no justification to use health to rationalise simply because the carbonated soft drinks sector has not violated the regulations.
“Drawing a similar parallel with the tobacco sector case. The sector also suffered a similar fate if the imminent dangerous trajectory that the carbonated soft drinks is been pulled towards. The regulatory position was such that advertising of tobacco was banned. Meanwhile, the effects of that were that the smokers migrated to other unregulated substances and drugs including tramadol and sundry substances.”
Similarly, when the cost of carbonated drinks goes higher in view of the reality of the additional excise tax, he fears those who consume these drinks will look for alternatives, adding that, “these alternatives are such that the government cannot control and access their distribution. For instance, the government cannot control Zobo or Kunu. Kunu and Zobo have sugar contents that have not been scientifically subjected to factory tests regarding their sugar contents compared to carbonated soft drinks.”
Controlling sugar consumption, according to him, is essential but raising taxes is not the solution, stating that, the best way to control sugar consumption is by setting and enforcing regulations around the amount of sugar used in carbonated drinks.
In addition, he said, a social awareness programme explaining the consequences of excessive sugar consumption should be made with messages placed on non-alcoholic carbonated drink bottles, like the country’s chief medical officer’s warning on a cigarette pack.
“The federal government needs revenue, and rightly so. On a net position, government targets a total of N81 billion in collection with the successful implementation of the proposed additional 20 per cent Ad-Valorem Excise Tax, but the N10/per litre tax on Carbonated non-alcoholic drinks has already led to a 16 per cent fall in industry revenue, hence, the ugly scenario which would be created will affect the overall economic productivity which government is trying to protect,” he pointed out.
He averred that a PwC study showed that “the expected revenue government intends to generate from the proposed additional 20 percent Ad-Valorem excise tax is about N81billion, and a cursory look at the reduction in Value Added Tax (VAT), Company Income Tax [CIT], and Personal Income Tax [PIT], there would be about N200 billion unclaimed tax being threatened, which is not good for the economic recovery policy of an emerging market economy like Nigeria. The meaning is that the government would not meet its desired increased net revenue target from the sector in 2022/2023.”
In essence, he said, what this portends for the system is such that a position known as the Cobra effect is forced on the government such that its solution is worse than the original problem.
Similarly, a PwC analyst, Mr. Olufemi Awoyemi, said taxing of productive sector, where government has rarely supported, is a slap on the faces of the manufacturers of non-alcoholic beverages.
“Players in the productive sector generate, for themselves, electricity, security, finance, water and even roads in some instance, operating in a harsh operating environment, yet, the same government come back to tax the sector it never supported. That is cruel. There must be justification for tax but in this instance, there is none,” he stressed.
Rather than government pursuing companies who are already generating revenue for it, creating jobs and growing the economy, for tax, he urged federal government to focus more on tax defaulters by bringing more taxable individuals and companies into the tax system, thereby, increasing government revenue instead of killing a struggling sector.
