Key highlights
- CPPE says policy measures failed to reckon with the multifarious challenges which industry operators are currently grappling with.
- Implications include a drop in sales and loss of direct and indirect jobs.
- Federal Government said under the new tax regime, N75 per litre will be charged on beer, stout and imported wine, adding that this new excise duty on beer and stout will be increased to N100 per litre in 2024.
The recent plan by the FG to increase taxes on alcoholic beverages, imported vehicles and single-use plastics in its new tax regime will negatively affect sales and also impact jobs.
This was disclosed by Dr Muda Yusuf, Founder, of the Centre for the Promotion of Private Enterprises (CPPE) in a statement on Tuesday.
The CPPE chief warned that it is insensitive of policymakers to impose a 40 percent import duty on vehicles in an economy where there is no mass transit system,
Negative Impact
Dr. Yusuf warned that the tax provisions will also have negative consequences for Nigeria’s industrialization drive and exacerbate inflationary pressures, citing that the construction and transportation sectors were also vulnerable to fiscal policy-induced downside risks, he added:
- “It should be noted that Ad valorem tax is based on the value of the product, which makes the impact even more injurious to industrialists, and sustaining current investments in these sectors would be a herculean task.
- “These policy measures failed to reckon with the multifarious challenges which industry operators are currently grappling with.
- “The implications for the sector include a drop in sales, loss of direct and indirect jobs, risk of decline in profitability and shareholder value and elevated risk of smuggling products.”
Vehicle Import Duty
On the plan to increase vehicle import duties by 40%, he said the justifications are low citing the FX impact on Nigerian disposable income for the middle class, adding that implications of the policy on the economy included high transportation costs and risk of increased smuggling,
- “It is therefore insensitive of policymakers to impose a whopping 40 per cent import duty on vehicles in an economy where there is no mass transit system and where vehicle ownership has become a necessity, especially for the middle class”
He also added that the import duty of 45 per cent on iron and steel products, currently contends with the high cost of construction of both public and private properties.
Yusuf urged that fiscal policy measures must seek to ensure a good balance between objectives of revenue generation, boosting domestic production, enhancing the welfare of citizens and promoting economic growth amongst others.
Backstory
Nairametrics reported last week that Federal Government introduced a new set of taxes on alcoholic beverages, imported vehicles and single-use plastics in its new tax regime.
The government has also added to the list of items banned from being imported into the country with about a month to the end of President Muhammadu Buhari’s administration.
- The Federal Government said under the new tax regime, N75 per litre will be charged on beer, stout and imported wine, adding that this new excise duty on beer and stout will be increased to N100 per litre in 2024.
- The Federal Government also revised the import prohibition list with the inclusion of new items.
- Additional taxes are to be levied on motor vehicles with a 2% new tax on 2-litre engine vehicles, while 4-litre engine vehicles will attract a 4% new tax.
