FG: No Ad Valoren Tax in Finance Bill 2022 Draft

•Says govt still consulting stakeholders 

•MAN alleges FG sacrificing soft drinks manufacturers for elusive tax revenue 

•Ekpo says raising tax at this point unnecessary

Dike Onwuamaeze

Contrary to concerns in the manufacturing circle that the sector would be visited with additional 20 per cent Ad Valorem Tax (AVT) for manufacturers of carbonated soft drinks, the federal government has clarified that there was no such provision in the draft copy of the Finance Bill 2022 that is currently before the Federal Executive Council (FEC).

The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, made the clarification in response to THISDAY’s enquiry against the background of fear gripping the members of the Manufacturers Association of Nigeria (MAN) that the federal government had initiated a process that would impose 20 per cent AVT on the manufacturers of carbonated nonalcoholic soft drinks through the finance bill.

Ahmed told THISDAY: “It is not in the draft Finance Bill 2022 before FEC (Federal Executive Council). We will conduct wider consultations on the subject.”

However, the MAN, which had stated that the government was perfecting the introduction of the AVT, had urged the government not to sacrifice soft drinks manufacturing companies on the altar of elusive quest for tax revenue with the imposition of the AVT on the sector.

The Director General of the MAN, Mr. Segun Ajayi-Kadir, called on the National Assembly to reject any such amendment to the Finance Act 2021

Ajayi-Kadri said: “We, therefore, call on the National Assembly to reject this amendment to the Act. We are hopeful that adequate time will be given for public hearing on this bill and stakeholders will be invited and their input accommodated.”

He added: “There is no question about the imminent catastrophic effect of the introduction of new excise rate on these (soft drinks) products. Its introduction portends overwhelming negative impact on the most performing sector in the manufacturing space and it is quite unfortunate.

“It would appear that the goose that lays the golden egg is being sacrificed; seeing that the affected sub-sector has contributed most significantly to the economy and taxes despite the debilitating impacts of Naira devaluation, inadequacy of forex and the COVID-19 pandemic.

“The food and beverage contributed the highest (38 per cent) of the total manufacturing sector to the GDP! It comprises 22.5 per cent of manufacturing jobs and generates more than 1.5million jobs. So, this excise would certainly cast a sunset to these performances.

“It is evident that the assumed revenue gains are the basis for the introduction of this excise, but in the long run, it is being penny wise and pound foolish.”

Speaking in the same vein, Professor of Economics and Public Policy at University of Uyo, Prof. Akpan Hogan Ekpo, told the federal government that the solution to its revenue challenges does not rest on discouraging investments, especially in Nigerian traumatised economy. 

He said: “Tax increase at this point in our economy is unnecessary. The manufacturers would pass some of the tax to consumers thus further increasing the hardship of citizens.

“Already manufacturers are having a tough time procuring forex for their businesses. It will worsen the already unprecedented high rate of unemployment. There would be job loss and potential investors will be discouraged. Government should tax conspicuous consumption and expand the tax base to generate more revenue.”

Another economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprises (CPPE), Dr. Muda Yusuf, told THISDAY that the proposal would hurt the carbonated drinks and nonalcoholic beverage segments of the Nigerian manufacturing sector.

Yusuf said: “The decision seems to suggest that the policy makers are largely disconnected from the realities of manufacturing challenges in Nigeria because these investors have enough challenges already.

“They are grappling with high and escalating production costs, rising operating costs, depreciating exchange rate, illiquidity in the forex market, soaring cost of logistics, multiple taxation, and surging energy cost.

“It is unfair to contemplate an additional tax on this struggling sector. The CPPE strongly advise against the contemplation of an additional tax on this critical sector of our economy.”