Manufacturers in the country and the Nigerian Exchange Limited, on Thursday, expressed worry over the new taxes introduced by the 2021 Finance Act.
They said the introduction of excise tax on sweetened beverages and capital gains tax on shares, among others, would hurt investments in the country.
At a virtual fiscal policy dialogue organised by the Nigerian Economic Summit Group on the impact assessment of the 2021 Finance Act, Mansur Ahmed, president of Manufacturers Association of Nigeria, decried the imposition of excise duty on non-alcoholic drinks.
“Currently, the sector is struggling, and additional burden will obviously be a problem for the sector not only because it cannot be passed to the consumers at this stage because the consumer is already over-burdened,” he said.
Recognising the need for the government to generate more revenue, he said there was a need to broaden the tax net and ensure that “all those who are eligible do pay taxes and pay the correct amount of taxes.”
According to the Federal Government, the excise tax will help discourage excessive consumption of sugar in beverages which contributes to a number of health conditions including diabetes and obesity, and help raise excise duties and revenues for health-related and other critical expenditures.
Alfred Olajide, the managing director at Coca-Cola Nigeria, said the excise duty of N10 per litre on all non-alcoholic, carbonated and sweetened beverages would be detrimental to the growth and development of the soft drinks industry.
He said the food and beverage sector contributed over N200 billion value added tax, almost N400 billion in corporate income taxes in the last five years, and more than N100 billion in import duty in the last three years.
According to him, the industry operators continue to grapple with the exponential increase in costs and limited ability to pass it to the consumers, who are also under pressure.
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“It’s a lot of burden at this critical time. Looking at the food and beverage sector, it is so important to the economy that it needs to be protected. It has provided about 1.5 million jobs.
“I think what the industry is saying is that we don’t want to pay counterproductive taxes that stifle growth because it is when they grow, that true value is created. That is when they employ more people and perform more CSR activities.”
According to Olajide, the excise tax being a production tax makes it worse for them as it is not based on what is sold but what is produced.
“So whether you sell or not you have to pay tax,” he said.
Temi Popoola, chief executive officer of NGX, noted that capital gains tax had been introduced on sale of shares worth N100 million and above.
“If you look at this from the lens of what the government is trying to do, which is to diversify revenues, this is welcome. But if you look at the lens of the capital market growth, I think one would argue that perhaps one could take a second view at this,” he said.
He noted that retail investors had been driving the recovery in the stock market as foreign and local institutional investors stayed away from the market.
“Most of the retail investors that we have do not fall under the N100 million; that is a good thing. What does a policy like this do? It introduces a level of uncertainty to investors,” he said, adding that the uncertainty could discourage retail investors from investing in the market.
“That is what potentially you can do to our part of the market which is actually striving to recover. Then you have the institutional investors, mainly local, who also we are trying to attract back to the capital market.”
On the indirect impact of the Finance Act on the capital market, Popoola said, “The bill is introducing excise taxes on non-alcoholic beverages, and of course, it is not very difficult to see that investors who come to capital market come because they expect dividends, they expect that corporates can make money and ultimately drive returns to them.
“I think indirectly, when you look at things like the education tax that is being introduced, there are arguments that could make as to whether corporates really can handle this and the timing and things like that. Ultimately what could happen is a not-so-positive effect on the cash flows of companies, their ability to pay dividends and this has ultimate impact on the capital market.”
