- Mixed Reactions Trail Excise Duty Hike on Alcohol, Tobacco
Finance and economic experts on Monday expressed mixed reactions on the implementation of a new excise duty rates on alcoholic beverages and tobacco products.
Under the new excise duty rates approved by President Muhammadu Buhari in March, which came into effect on Monday, consumers of alcoholic beverages and tobacco are to pay more for the products.
In order to implement the newly approved excise duty rates for tobacco, the government said in addition to the 20 per cent ad-valorem rate, each stick of cigarette would attract a N1 specific rate (N20 per pack of 20 sticks) in 2018; a N2 specific rate per stick (N40 per pack of 20 sticks) in 2019 and a N2.90k specific rate per stick (N58 per pack of 20 sticks) in 2020.
For beer and stout, the government said these would attract 30 kobo per centilitre in 2018 and N0.35k per centilitre each in 2019 and 2020.
Wines will attract N1.25k per centilitre in 2018 and N1.50k per centilitre each in 2019 and 2020.
For spirits, the government approved N1.50k per centilitre in 2018, N1.75k per centilitre in 2019 and N2 per centilitre in 2020.
Speaking in separate interviews with our correspondent, some of the experts said that the increase in rates would stifle further investments in these sectors of the economy, others noted that the hike was long overdue.
Those who spoke on the issue were a developmental economist, Odilim Enwagbara; the President, Business Renaissance Group, Mr. Omife Omife; and a former Director-General, Abuja Chamber of Commerce and Industry, Chijioke Ekechukwu.
Odilim said the hike in excise duty for alcoholic beverages was long overdue.
According to him, alcoholic beverages and tobacco are classified under luxury goods, adding that those who want to consume such products should be willing to pay more taxes.
He stated, “It is long overdue because we have to do that to make them pay more, because the government needs to generate revenue from those areas that may generate problems for the economy in terms of health problems.
“And so, to discourage consumers from taking these products, you will have to tax them more and that is the practice all over the world.
“They are luxury goods and if you are really rich, then you should be able to afford the cost of drinking alcohol; and if you want to indulge in smoking, then you must be willing to pay extra for it notwithstanding the health implications.”
When asked if the move by the Federal Government to increase the duty on these products would have a negative impact on the manufacturing sector, Enwagbara ruled out such a possibility.
“I don’t think it will have any negative impact on the manufacturing sector, because a company can diversify its portfolio from producing what is harmful to the people and the economy to other production lines,” he stated.
But Ekechukwu said that increasing excise duty on alcoholic beverages and cigarettes at a time when the government was working hard to reduce inflation rate was not well articulated.
He noted, “When this excise duty becomes operational, a few things will happen. Firstly, smuggling of these products from neighbouring countries into Nigeria will start.
“Secondly, there will be fake products all over the Nigerian market. Thirdly, it will create additional inflation and work against the fight to reduce our inflation rate as these cost will be passed over to consumers.”
Ekechukwu added that the policy might result to job losses as companies would strive to reduce their cost of production in order to maintain profit.
“The reasons adduced for increasing the tariffs are not plausible and not economically reasonable. The revenue we intend to generate there from will be lost through the foregoing demerits,” he added.
Speaking in the same vein, Omife called on the Federal Government to reverse its decision as the policy was capable of affecting investments in the manufacturing sector.
He said with the new tariff regime, firms in the sector would face high risk of possible shutdown, especially in the low price segment, which accounts for 78.65 per cent volume of the spirits and wines segment.
He noted that the new excise duty would also penalise average Nigerians as they would no longer be able to afford the new prices that include the exorbitant excise duty.
Omife added, “The wines and spirits industry is one of the few surviving sectors of the Nigerian economy and all patriots and men of good conscience should strive to ensure that the sector flourishes.
“Nothing should be done to endanger the sector. It is apparent that the announced astronomical increase in excise duty by the Minister of Finance is bound to endanger the sector if not reviewed and rescinded.”
He said given the challenges of border control and illicit market, the attractiveness of the price increase driven by higher duty would result in smugglers bringing in unregistered and untaxed products.
This, according to him, will result to loss of revenue to the government.
“The astronomical increase in the tariff is counter-productive and will lead to massive job loss, turn the country into a dump yard for foreign products, further pauperise Nigerians and stifle growth in an otherwise resilient sector of the economy,” he added.
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