The carbonated soft drinks sub-sector of the Manufacturers Association of Nigeria (MAN) has raised the alarm over the Federal Government’s proposed 20 per cent Excise Tax on Non-Alcoholic Beverages which covers the widely consumed Carbonated Soft Drinks (CSD) segment.
The group said such a move would spell doom for the sector as the effect of the prevailing N10 per litre tax regime is already crippling the sector with its biting effects on businesses.
Speaking on behalf of the group, the Corporate Affairs and Sustainability Director, Nigerian Bottling Company (NBC), Ekuma Eze said since the introduction of the N10 per litre Excise Tax, businesses in the sector had been experiencing a worrisome decline. He revealed the average loss in volume and revenue was 10 per cent between June and September this year, adding it is estimated the decline would further worsen to 25 per cent by December.
Eze said the impacts of the prevailing N10 per litre excise tax effect between June and August this year had shown an 8 percent revenue decline as a direct result of excise tax implementation adding it is projected that the decline would hit 25percent by December if not reviewed.
This, he said excluded the cost of write-offs of products produced, excised but not sold. “With the proposed 20percent Ad-valorem tax introduction, the collapse of the soft drink market is imminent. This will be catastrophic as thousands of jobs would be affected and the ultimate aim of the government in collecting revenue would be completely defeated”, Eze lamented.
“Most certainly the additional 20% will not only kill the sector but results in the loss of revenue by the Federal Government, and a consequential phenomenal loss of jobs by various layers of the Nigerian workforce”, he added.
Eze noted the manufacturing industry contributes 15 per cent to the Gross Domestic Product (GDP) of the Nigerian economy, while the food and beverage sector contribute 5 per cent, and with a payment of N202 Billion to the government on Value Added Tax (VAT), and N207 Billion in Company Income Tax.
Apart from the multiplier effect on infrastructural development and growth of the already troubled economy, the director said an enormous amount would be lost by the Federal Government if the sector was allowed to collapse.
According to Statistics released by the Nigeria Bureau of (NBS), the food and beverage division of the economy in the last five years had generated 1.5 million jobs, both direct and indirect. Eze noted it was from 2020 to date, that some companies in the sector strived 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.
There is evidence that the current N10 per litre excise tax on non-alcoholic beverages is ravaging the sector as the companies pay N10 (Ten Naira) for every litre of beverage produced, whether or not sold.
He decried the devastating effects of the N10 per litre tax, which he noted had become burdensome with the high cost of operation in the country and its constituent elements. This is already having devastating effects on the end cost to consumers, considering their poor economic condition; an additional 20 per cent will most certainly kill the sector, he stated.
He therefore called for the suspension of the excise tax being proposed by the Federal government to forestall the collapse of the industry pointing out the N10 per litre currently in practice has no bearing on profitability for any of the members of the group.
