Implication of new excise duties
Consumers of alcoholic beverages and cigarettes will from June 4, 2018, pay more for their favourite brands as the federal government recently announced an upward review of the excise duty rates for the products.
President Muhammadu Buhari, who gave approval for the amendment, also gave a three month grace period to all manufacturers before the commencement of the new excise duty regime.
Excise duties are taxes paid on good manufactured in a country. This is different from custom duties which are taxed on imported goods.
The Abuja Inquirer had in its February 12 to 18, 2018, edition led with a report that the Minister of Finance, Mrs Kemi Adeosun, had sold the idea of reintroducing excise duty on selected goods. Some of the goods suggested to the president then included soap, perfumes, cosmetics, non-alcoholic beverages, toilet paper, recharge cards, and other basic necessities.
The recommendation for reintroducing excise duty on the products was made by the Tariff Technical Committee, TTC, which has members drawn from ministries of agriculture, industry, CBN, FIRS, the SGF’s office as well as from the Manufacturers Association of Nigeria.
Mrs. Adeosun while disclosing the planned increase on behalf of the federal government, said the new excise duty rates will spread over a three-year period from 2018 to 2020 in order to reduce the impact of the increment on Nigerians.
She said that the new excise duty regimes followed all-inclusive stakeholder engagements by the Tariff Technical Committee of the Federal Ministry of Finance with key industry stakeholders.
Under the newly tax regime for tobacco, consumers will by 2020, pay an additional N3 for every stick of cigarettes they buy, while Beer & Stout would attract N0.30k per centilitre, CL, in 2018 and N0.35k per CL each in 2019 and 2020.
In addition to the 20 percent ad-valorem rate, government say each stick of cigarette will attract a N1 specific rate per stick (N20 per pack of 20 sticks) in 2018, N2 specific rate per stick (N40 per pack of 20 sticks) in 2019 and N2.90k specific rate per stick (N58 per pack of 20 sticks) in 2020.
The new specific excise duty rate for alcoholic beverages cuts across beer & stout, wines and spirits for the three years 2018 to 2020. Consequently, wines would attract N1.25k per CL in 2018 and N1.50k per CL each in 2019 and 2020, while N1.50k per CL was approved for spirits in 2018, N1.75k per CL in 2019 and N2.00k per CL in 2020.
Nigeria’s cumulative specific excise duty rate for tobacco is said to be 23.2 percent of the price of the most sold brand, as against 38.14 percent in Algeria, 36.52 percent in South Africa and 30 percent in Gambia.
The current administration is working at growing the economy away from over dependence on crude oil, with focus on non-oil sectors like agriculture and solid minerals. Attention has also been focused on government’s tax revenue, as income from value added tax has steadily increased. For instance, proceeds from VAT rose from N80.426billion in November 2017, to N80.604billion in December 2017 and then N96.646billion in January this year.
Schemes like the Voluntary Assets and Income Declaration Scheme, VAIDS, was also introduced to encourage defaulters rectify their tax records.
So far government’s efforts at increasing its tax income can be said to be yielding the desired outcome. However, the attempt at reintroducing excise duty on products that were ousted in 2009, back into the excise net in 2018, a period when most Nigerians are still struggling to bounce back following the country’s exit from recession , reek of insensitivity.
Although the TTC had recommended an upward review of excise duty rate on some fast moving products like soap, detergent, juice, non-alcoholic beverages, etc. The President should be commended for declining the recommendation as the masses would have been worst affected by any further increase.
While we agree with government’s reasons for increasing the excise rates on economic and health grounds, government must go a step forward in making its reason credible enough. Consumers of these products should not be seen as the expendable part of a puzzle that was sacrificed to fulfil government’s revenue drive.
The federal government should come up with policies out rightly banning smoking and consumption of alcohol, at least in public places, or invest in media campaigns to make smokers realise the need to quit their addiction. Countries like Albania, Argentina, Brazil have either banned smoking in public places throughout the country, or restricted the act to designated areas.
In a competitive market like Nigeria, local manufactures would also be affected by the new tax regime, as they would be faced with either bearing the cost of the tax increase or risk losing their customers to other brands that are willing to bear these costs.