Need for Transparent Implementation of Sugar Tax

James Emejo writes that the federal government must implement the fiscal policy regime on the new sugar tax in a most transparent manner in order to achieve the desired objectives

In January 2022, the federal government hinted at the imposition of N10 per liter tax on Sugar-Sweetened Beverages (SSB) as part of the critical policy thrusts of the Finance Act 2021.

The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed explained that the tax became inevitable in order to discourage excessive consumption of sugar in beverages, which had continued to imperil the lives of Nigerians.

Specifically, the minister said, “This new sugar tax is introduced to raise excise duties and revenues for health-related issues and other critical expenditures. It is in line with the 2022 budget priorities.”

She said, “In section 17 of the Finance Act, there is a law that has imposed a duty on non-alcoholic carbonated sweetened beverages. There is an excise duty of N10 per liter imposed on all non-alcoholic carbonated and sweetened beverages and this is designed to discourage excessive consumption of sugar in beverages which contributes to a number of health conditions including diabetes and obesity.”

Welcome development

The new sugar tax was celebrated by stakeholders, particularly by the health sector operators who hoped that the revenues generated would help to provide infrastructure in the country’s health sector to among other things cater to the victims who had been afflicted by sugar-related health challenges.

By May 2022, amidst a seeming lack of action towards the implementation of the new sugar law, stakeholders under the aegis of National Action on Sugar Reduction (NASR) in an Open Letter to the Minister of Finance, Budget and National Planning, welcomed the introduction of a N10 per liter excise tax on all non-alcoholic, carbonated and sweetened beverages in the 2021 Finance Act.

The coalition which consisted of the Nigerian Medical Association, Diabetes Association of Nigeria, Nutrition Society of Nigeria, Nigeria Cancer Society, Nigeria Health Watch, the Nigerian Heart Foundation, Bundies Care Initiative and NOI Polls among others, specifically called on the federal government to move swiftly to announce the tax enforcement structure and the timeline for the implementation of the SSB tax for the benefit of Nigerians and the economy at large.

The coalition further described the sugar tax as vital health and finance policy intervention which the government should take additional steps to ensure its effective implementation through its enforcement and evaluation- and appealed for swift implementation against the backdrop of concerns over the significant opposition to the tax by the beverage industry, which had described the pro-health intervention as an unnecessary burden on Nigerian consumers.

NASR, in their letter to the minister, expressed anxiety that further delay in the implementation of the tax could jeopardize it completely.

The group said, “Recent developments have revealed the importance of protecting the tax and ensuring its swift implementation. Significant opposition to the tax has already arisen, with the beverage industry framing it as an unnecessary burden on the Nigerian people.

“The industry has tapped highly influential groups and spokespersons to amplify this narrative. Further delay in implementing the tax can jeopardize it completely.”

The letter added, “Pro-health taxes receive more public support when citizens understand why the government has taken these measures. The Nigerian government and people stand to gain health and economic benefits from the tax.

“In South Africa, the introduction of an SSB tax not only led to reduced SSB consumption among heavy consumers it also generated revenue that exceeded forecasts. In the first year of implementation, around $140 million in SSB tax revenue was recorded.”

Cause for concern

A recent report by the Non-Communicable Disease (NCD) unit of the World Health Organisation (WHO) painted a grim reality of the cost of unregulated consumption of sugar by individuals resulting in sometimes terminal illnesses.

The report, which further justified the imposition of taxes on sugary drinks, identified them as a major contributor to obesity and diabetes.

The WHO stated that the worldwide prevalence of obesity had nearly tripled since 1975, adding that an estimated 39 per cent of adults were overweight in 2014, and 13 per cent were obese while about 41 million children under the age of 5 were overweight or obese in 2016.

The study specifically noted that the prevalence of overweight in pre-school aged children is increasing fastest in low- and lower-middle-income countries stressing that people who consume sugary drinks regularly – 1 to 2 cans a day or more – have a 26 percentage greater risk of developing type 2 diabetes than people who rarely consume such drinks.

According to the report, the number of people with diabetes had risen from 108 million in 1980 to 422 million in 2014 while the number of obese children and adolescents rose from 11 million in 1975 to 124 million in 2016 – a tenfold increase.

The WHO pointed out that “Apart from diabetes, obesity is a major risk factor for heart diseases, cancers and other diseases.”

The WHO also estimated that from 2011 to 2030, losses in Gross Domestic Product (GDP) worldwide due to diabetes are expected to hit $ 1.7 trillion, $ 900 billion in high-income countries and $ 800 billion in low- and middle-income countries including both direct and indirect costs.

Banking on sugar tax 

The report, however, pointed out that governments could take a number of actions to improve availability and access to healthy foods and have a positive influence on the food people choose to consume.

WHO stated, “A major action for comprehensive programmes aimed at reducing consumption of sugars is the taxation of sugary drinks. Just as taxing tobacco helps to reduce tobacco use, taxing sugary drinks can help reduce consumption of sugars.”

Concerns over SSB tax implementation

The federal government last month finally disclosed that the fiscal regime on the imposition of N10 per liter of SSB had actually commenced by June 1, 2022, adding that the first duties were expected to be collected from companies by July 21.

The development was confirmed by both Chief Superintendent of Customs (CSC), Dennis Ituma and CSC, Opeyemi Itulua, that enforcement of the regulation had commenced in earnest early last month and those companies are expected to start remitting the first set of appropriate taxes to the government on/or before July 21.

The duo, during the policy breakfast meeting on the SSB, which was organised by NASR and attended by high-level officials and representatives from the Federal Ministry of Health, Federal Ministry of Finance, Budget and National Planning, National Assembly, Nigeria Customs Service, and the World Bank, said there had been proper awareness on the implementation among affected manufacturers.

Stakeholders however fear that the proceeds from the sugar legislation may be diverted to other uses, which are unrelated to health.

Only last month, players in the health sector including civil society groups pressed the federal government to match words with action and show discipline by ensuring that the proceeds from the SSB tax are strictly committed to funding health intervention projects, knowing that the government might be tempted to deploy the resources to other investments amidst the present fiscal challenges.

They narrated how Nigerians lose their lives battling sugar-related ailments in poorly funded hospitals across the country and insisted that the monies be used to reposition the health sector and not diverted.

But, in response to their agitation, a representative of the Federal Ministry of Finance, Budget and National Planning, Mr. Musa Umar, pointed out that their request could not be guaranteed at the meeting and advised them to refer the matter to the higher authorities, including political office holders and the ministry of health for proper attention.

According to him, “When they collect these monies, they go to the Consolidated Revenue Fund. Now, the issue of using this money to take care of all these diseases; the truth is that there is a need to take your advocacy to a higher level because this is something that has to do with the Federal Ministries of Health and Finance.

And that issue is far beyond this table. It is an advocacy that should be taken to the political office holders…I don’t think there are any existing laws as far as I am concerned that say this money collected should go directly and be put into taking care of all these issues you have talked about. “

Yet, Ahmed had emphatically stressed that the purpose of the SSB tax was to discourage sugar consumption as well as invest in health projects.

Uneasiness over transparency

Stakeholders had also called on the customs to ensure regular publication of the amounts generated from sugar taxes in the spirit of transparency and so Nigerians can track its efficient utilisation.

Reacting to the request, however, Dennis said the Finance Act transmitted to the service does not confer the powers on customs to publicise the amount realised from the tax but advised the stakeholders to make use of the Freedom of Information (FOI) Act to demand accountability, adding that “it is out of our schedule to publish the figures generated”.

Analysts, however, advised that the government must rise to the occasion by ensuring that the laudable objectives of the sugar tax are not defeated by seizing the opportunity to boost investment in the health sector as well as save the lives of Nigerians through a deliberate policy to deploy the proceeds to the health sector alone.