- Nigeria’s Excise Duties on Tobacco, Alcohol Very Low – IMF
The International Monetary Fund has said that the excise duties being charged by the Federal Government on tobacco and alcohol are very low.
The Fund said this in its 2017 mission report, a copy of which was sighted by our correspondent on Tuesday in Abuja.
It stated that there was a need for Nigeria to raise the excise duty on a stick cigarette to N5 as a fail-proof revenue raising strategy.
This is five times higher than the N1 excise duty approval given by President Muhammadu Buhari, which was announced on Sunday by the Minister of Finance, Mrs. Kemi Adeosun.
Under the newly approved rates for tobacco, which take effect from June 4, each stick of cigarette will attract a N1 specific rate (N20 per pack of 20 sticks) in 2018.
For 2019, the sum of N2 specific rate will be charged per stick (N40 per pack of 20 sticks), while 2019 will have N2.90k specific rate per stick (N58 per pack of 20 sticks).
But the Fund stated in the report that tobacco prices should be adjusted upwards in conformity with the global tobacco convention goal of achieving an excise burden of 64 per cent of the retail price per pack of 20 cigarettes.
The IMF also recommended that excise duties should be converted from ad-Valorem to specific rates to reflect the external cost of consumption and production.
It said, “Nigeria’s tobacco excise duties are very low at 16 per cent of the retail price since excise duties are generally shifted forward into consumer prices; by extension, cigarette retail prices in Nigeria are only a fraction of the retail prices.
“To reflect the fact that tobacco excise is a proxy for the social cost that smokers impose on other people, it is recommended that the duty should be made specific and imposed at N100 per pack of cigarette of 20 over a three-year period.”
For alcoholic beverages, the Fund said that the current rate of 20 per cent was low.
This, according to the IMF, does not account for the external costs that abusive drinkers impose on other people.
The Fund stated that chronic heavy drinking had a harmful effect on the health system such as organ damage and birth defects.
It said studies had shown that abusive drinkers were the cause of accidents and domestic violence.
It added that the World Health Organisation had provided evidence that in most countries, excessive consumption of alcoholic beverages was responsible for up to 10 per cent of the total disease burden.
The report added, “The duties on alcohol and alcohol beverages in Nigeria are low compared to those found in other countries. Excise duties of beer in Nigeria are 2/5 of the duty in Kenya and one and a half of the level in South Africa.
“The low tax level prevails even though Nigeria is the highest alcohol drinking country in Africa and leads the top 10 largest beer drinking countries.”