Labour Rejects FG’s Imposition Of Tax On Carbonated Drinks

The organised labour under the auspices of the Nigeria Labour Congress (NLC) has asked federal government to rescind decision on the re-introduction of excise duties on locally produced non-alcoholic and carbonated drinks.

It cautioned the federal government not to allow the current situation to degenerate into a breakdown in industrial relations in the sector and generally in the country.

The Congress urged the National Assembly to urgently amend the sections of the Finance Act 2022 that re-introduced excise duties on non-alcoholic and carbonated drinks.

In a statement issued yesterday by the NLC President Ayuba Wabba, the Congress said that apart the eventual revenue losses, the policy will lead to loss of 1.5 million decent jobs.

While justifying their position, NLC said that the food and beverage sub-sector has generated to the coffers of government N202 billion as VAT in the past five years, N7.3 billion as Corporate Social Responsibility and has created 1.5 million decent jobs both directly and indirectly.

In addition, it said government also stands to lose N197 billion in Value Added Tax (VAT), Company Income Tax and Tertiary Education Tax as a consequence of expected downturn in overall industry performance should the excise duties be effected as being planned.

President Muhammadu Buhari had signed into law the Finance Act 2022 on December 31. Some of the provisions of the Finance Act include the imposition of excise duties on locally produced non-alcoholic, carbonated, and sugary drinks.

The NLC said the reason offered by government for this decision was to discourage the consumption of sugar by Nigerians as government claims that soft drinks have contributed to upsurge of cases of obesity and diabetes in Nigeria.

However, NLC said it had appealed to the President Buhari, and the leadership of the two chambers of the National Assembly in a letter dated November 27, 2021, pleading that government should suspend the re-introduction of excise duties on locally produced non-alcoholic carbonated drinks.
“The Congress provided a number of very cogent reasons why government should not go ahead with the decision to impose fresh taxes on soft drinks.

“One of the reasons we advanced was that the re-introduction of excise duties on non-alcoholic, carbonated and sugary drinks will impose immense hardship on ordinary Nigerians who easily keep hunger at bay with a bottle of soft drink and maybe a loaf of bread.

“Our concern is the mass hunger that would result from the slightest increase in the retail price of soft drinks owing to imposition of excise duties as the product would be priced beyond the reach of millions of ordinary and poor Nigerians.

“Congress was also alerted by the complaint of manufacturers of soft drinks in Nigeria that the re-introduction of excise duties on their products would lead to very sharp decline in sales, forced reduction in production, and a sure roll back in investments with the certainty of job losses and possibly shut down of their manufacturing plants,” it said.

The labour movement recalled that a similar complaint of tyre manufacturing companies such as Dunlop and Michelin which was overlooked by government led to the relocation of the two companies to neighbouring Ghana.

“A similar situation is playing out with the soft drinks manufacturing sub-sector. Government should pay attention,” it said.

NLC added that: “With 38 per cent of the entire manufacturing output in Nigeria and 22.5 per cent share representation of the entire manufacturing sector in Nigeria, the food and beverage industry is the largest industrial sub sector in our country.

“The food and beverage sub-sector has generated to the coffers of government N202 billion as VAT in the past five years, N7.3 billion as Corporate Social Responsibility and has created 1.5 million decent jobs both directly and indirectly. There is thus no gainsaying the fact that the industry is a golden goose that must be kept alive.

“The health reason proffered by government as reason for the re-introduction of the excise duties seems altruistic. Yet, we are amiss why the government did not place the excise duties on sugar itself as a commodity rather than on carbonated drinks.

“The truth of the matter is that additional increase in the retail price of carbonated drinks would put more Nigerians at risk of serious health challenges as many people would resort to consuming sub-standard and unhygienic drinks as substitutes for carbonated drinks.

“The appeal to rescind the re-introduction of excise duties on non-alcoholic drinks becomes even more compelling when the projected immediate revenue expected from the policy is weighed against the potential long-term loss to both manufacturers and government.

“The beverage sub-sector will lose 40 per cent of its current sales revenue. This translates to a loss of N1.9 trillion.

While the government will only make a total projected receipts of N81 billion from the proposed re-introduction of the excise duties. Government also stands to lose N197 billion in VAT, Company Income Tax and Tertiary Education Tax as a consequence of expected downturn in overall industry performance should the excise duties be effected as being planned.

“In light of the foregoing, we ask the National Assembly to quickly amend the sections of the Finance Act 2022 that re-introduced excise duties on non-alcoholic and carbonated drinks. We also ask government to extend COVID-19 palliatives and support incentives to the Food and Beverages industry to cushion the shock and haemorrhage that the industry is trying to recover from.

“Finally, we demand that government should engage employers in the sub-sector and organised labour in sincere discussions on other options that can deliver a mutually satisfying win-win solution on this issue.”