Effective June, this year, the federal government will respectively charge N75 per litre of beer, stout, and wine imported into the country in 2023 and N100 per litre in 2024. The new levies are in whose interest? TOPE SUNDAY writes.
Recently, the federal government announced the imposition of a 30 per cent tariff on the importation of alcoholic beverages such as wine, spirits including whiskey, brandy, vodka, rums, and smoking tobacco – cigarettes, among others.
The Minister of Finance, Budget and National Planning, Hajia Zainab Ahmed, who disclosed this in a document, also confirmed that President Mohammadu Buhari had approved the implementation of the 2023 fiscal measures made up of Supplementary Protection Measures (SPMs) for the implementation of ECOWAS Common External Tariff (CET) 2022-2026 and revised excise duty rate on alcoholic beverages, cigarettes, and tobacco products as well as the introduction of excise duty on Single Use Plastics (SUPs).
The new levies
According to the document, the government also imposed a five- per cent duty on telecommunications services such as mobile telephony and operations (GSM), fixed telephony operators (fixed/fixed wireless), internet service providers (ISPs), other operators (operators other than mobile fixed telephony, ISPs), as a such tariff on post/pre-paid for these services is now 5 percent.
Also, the tariff on smart phones was increased to 15 per cent from 5/10 per cent 2022-2026 ECOWAS CET duty/IAT. Raw cane sugar now attracts 70 per cent duty from 60 per cent and crude palm oil 35 per cent from 25 per cent.
But a further analysis of the document shows that beer and stout including other alcoholic beverages and beer not made from malted- whether fermented or not, attract 20 per cent import duty. With this,
the federal government will also charge N75 per litre of beer, stout, and wine imported into the country in 2023 and N100 per litre in 2024.
Blueprint Weekend recalls that before the new tax regime, the government taxed imported alcoholic beverages ad valorem i.e. levying of tax or customs duties proportional to the estimated value of the goods or transaction concerned.
Implications
A detailed analysis of the new levy on alcohol shows the taxes to be paid by alcoholic beverage firms starting from June have more than doubled. Also, according to the 2023 Fiscal Policy Measures (FPM) document signed last month by the minister of finance, budget, and national planning, the total specific rate for beer and stout, wines, and spirits (per litre) is now N300, a 114.3 per cent growth from N140 last year.
It is also 76.4 per cent higher than the rates they were meant to pay this year before the review and 32.5 per cent (N408.2) higher in 2024.
Also, the total ad-valorem rate levied on alcoholic beverages and tobacco products rose by 40 percentage points to 110 per cent in June from 70 per cent in the same period of last year. The total ad-valorem rate for next year still stands at 110 per cent. Before the taxes were updated, the total ad-valorem rate was previously set to be 70 percent effective in June.
But experts are of the view that the fiscal policy is not industry-friendly at a time when the cost of doing business, especially for manufacturers, has surged as a result of high inflationary pressures, which are at double digits and the highest level in 17 years.
“In March 2018, the Nigerian government amended the excise regime by increasing the specific rate on tobacco and alcoholic beverages, which was N0.2 per centilitre (Cl) in 2017. The upward review, which went into effect in June that year to 2020, had no ad-valorem tax for alcoholic beverages except for tobacco.
“A breakdown of the taxes from a 2018 PwC document shows that beer and stout attracted N0.30 per Cl each in 2018 and N0.35 per Cl each in 2019 and 2020 while wine attracted N1.25 per Cl in 2018 and N1.5 per Cl in 2019 and 2020. Spirits had N1.00 per Cl in 2018, N1.75 per Cl in 2019 and N2.00 per Cl in 2020.
“For tobacco, a specific rate of N1.00 is levied on each cigarette stick in 2018. The following year, the specific rate rose to N2 per stick, and N2.90 per stick in 2020. No ad valorem rate was applicable for beer and stout in 2022 but in 2023, a 20 percent ad valorem rate was introduced and the specific rate increased to N75 per litre in 2023 from N40 in 2022.
“For wines and spirits, the 20 percent ad valorem rate rose to 30 percent. The specific rate for wines rose to N75 per litre from N50 per litre, while the rate for spirits increased to N150 from N50. Tobacco’s ad valorem rate was retained at 30 percent but the specific rate is N8.20 per stick from N4.2 per stick.”
Slimmer profits margins loom
The deputy president of Lagos Chamber of Commerce and Industry, Mr. Gabriel Idahosa, in a media report, said the volumes of alcohol and tobacco products will reduce “since they are not matters of absolute necessity for consumers.” He said slimmer profits margins for the companies and returns to investments for shareholders are likely to reduce, should be expected.
He said for smaller products or companies in the brewery industry, the combination of reduced consumption and lower profit margins may knock them out of business or struggle to survive, which could eventually lead to job losses.
“Ultimately, it will affect the supply chain from the people who supply the raw materials to those involved in the transportation and distribution of the products in the country, further causing a decline to the Gross Domestic Product,” he said.
But Idahosa believes that the negative impact would only last for the next quarter or two quarters till the new administration, which takes office in May, reviews the policy.
On his part, the chief executive officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, said the revised excise duties might wipe out the brewery and other related sectors because they are already dealing with high costs of foreign exchange, high energy costs, transportation, and multiple taxations.
“The government has not been fair to the alcoholic industry. Many are struggling. And these new taxes might close their shops because they are already dealing with the problem of sales as a result of weak demand caused by the high inflation in the country,” he said.
Yusuf said the increased rates would reduce the industry’s revenues and profits, thereby affecting their ability to pay for other taxes like education, company income, and value-added tax. “You don’t increase revenue by killing the people who are giving it to you.”
In his opinion, an analyst, Akin John, told Blueprint Weekend that alcohol manufacturers should create awareness of the tax increases to consumers in order not to catch them unaware, adding the new tax regime would take a toll on some alcohol consumers who he said are struggling to satisfy their urge because of addiction.
He said: “Alcohol manufacturers should as a matter of urgency begin an aggressive campaign to inform their customers about the latest development. They need to make noise or campaign about the tax increment to let people know that the government is taxing them massively. That is the only way they can pass costs without any negative impact on their business. But in the actual sense of it, some alcohol consumers who are addicted to drinking, and are struggling to satisfy their urge, may find the new tax regime so hard.”
