By Habibat Aliu
Again, stakeholders have reiterated that the proposed plan by the federal government to introduce a 20 per cent ad-valorem tax on non-alcoholic beverages will only succeed in collapsing the widely consumed Carbonated Soft Drinks [CSD] segment of the economy.
The Founder and Chairman of Proshare Limited, Mr. Olufemi Awoyemi, at a press briefing to lament over the proposed plan, said introducing the new tax on a sector that is struggling to stay afloat will only spell doom for the CSD sector while also creating job losses in the manufacturing sector.
According to him, ad-valorem tax is a tax principle based on the productivity of a sector that is thriving and productive, maintaining that the federal government cannot introduce a sector that is currently having a negative level in terms of productivity.
In his words: “Ad valorem tax is normally a tax where you discover your economic recovery curve and you are growing well to extract from the increase in value not from a decline in value. In a country where inflation continues to grow so high, where the interest rate continues to grow so high, when the consumer’s purchasing power is declining, you then increase the cost of what is most affordable to them. It will turn out negative; so my own is not to defend so much of the industry but to defend Nigeria because, at the end of the day, the profit Nigeria is looking for in that proposed tax will only be a mirage.
“The manufacturing sector for which we have not invested things, we have not made it easier for them to clear goods from customs at an efficient price, we have not made it easier for them to do distribution through transportation network, we have not made it easier for them to get forex, we have not made it easier for them to be able to compete to bring in equipment and where we do not have power for our operations, means there is an optimal limit to which you can tax this particular sector,” he advised.
Also speaking, the Chief Economist, Proshare Limited, Teslim Shitta-Bey, said the industry suffers a challenge of infrastructure and energy, which he said, is very critical for the prospects of growth in consumer demand.
He added that the problem is not tax, but the tax base.
“How many people are taxed? Many of the institutions and individuals in this country are not taxed. Can we, therefore, identify those who are not paying taxes and not paying their share of the common patrimony of the commonwealth and get them to start paying something? So in an economy that is generally shrinking, do you add taxes to do such economies? That is not the best practice. The best practice is to look at alternative methods by which governments at sub-national and national levels can generate income,” he urged.
He further urged the federal government to look at the issue of financialisation, saying that it must look beyond income statements, advising that Nigeria can use its balance sheet as an alternative form of raising finance for the economy.
He also added that one of the largest bottling companies in the country suspended its investment of over £300 million in the first quarter of 2023 for the expansion of their domestic operations in the country due to the proposed plan to introduce the ad-valorem tax.
