Once prices are increased, consumers will push back, resulting in sharp decline in demand. With the planned increase in VAT, the introduction of excise will further burden operators in the sector with the following consequences: low demand leading to unsold products; incomes squeeze on businesses that are already struggling with low margin and massive staff layoff, which will affect over 250,000 direct and indirect employees in the sector among others.”
LCCI: It’ll amount to double taxation
The LCCI advised the Federal Government not to impose tax on carbonated drinks because it would negatively affect both manufacturers and consumers.
The Director-General of the LCCI, Mr Muda Yusuf, said this in a telephone interview with one of our correspondents.
He noted that imposition of another tax on the carbonated drinks, with the manufacturers having paid excise duty on such manufactured products, would ultimately affect the demand for the goods.
He added that consumers might resist buying, since the price would have shot up.
He said, “Any imposition of tax on carbonated drinks will definitely affect the demand for such products. Such imposition of tax would be another tax apart from the excise tax already paid by the manufacturers of such products.
“Ultimately, the demand for such products might drop due to the attendant increase in price that might occur. Those who could buy would buy at a higher price.”
Yusuf added that this move would be opposed to the government’s mantra of assisting the real sector, which are the manufacturers.
It’ll hike inflation – Ex-ANAN president
A former President, Association of National Accountants of Nigeria, Dr Sam Nzekwe, who noted that the purchasing power of many Nigerians was weak, said the soft-drink tax would lead to higher inflation rates.
“If this plan of government to tax soft drinks is implemented, then we should be ready for higher rates of inflation. Already, we have high inflation,” he stated.
Nzekwe told one of our correspondents that the Federal Inland Revenue Service had not been adequately reaching out to taxable companies, which was why the government often came out with policies aimed at taxing smaller items.
He said, “The taxes from the federal and state governments are becoming too many that you don’t know where to place them. Coming up with a new tax regime on soft drinks, I don’t think that is what will solve the funding challenges confronting the budget.”
An economist and Senior Lecturer, Lagos Business School, Dr Bongo Adi, said the imposition of excise duty on soft drinks would affect productivity and employment generation in the country.
He said, “I know that the government is trying to ramp up tax revenue; the truth of the matter is that tax is low in Nigeria. But I don’t know why they need to discourage the consumption of soft drinks.
“If you impose excise duty on a commodity that is price-sensitive, the demand will immediately drop as consumers will find alternatives.”
Adi noted that the imposition of tax on soft drinks would be counterproductive to government’s efforts to stimulate the real sector.