Barely two weeks after the sectoral group of the Manufacturers Association of Nigeria (MAN) raised an alarm over a proposed additional 20 percent Ad-Valorem Excise Tax on the Carbonated Soft Drinks (CSD) segment, the group has decried the emotional campaign to string up the sugar angle to the issue. The group has been using the sugar angle to rationalise an economic virus that may become a pandemic on the non-alcoholic beverage industry.
This is believed to be in reaction to the multidimensional pressure unleashed on the Federal Government by the sectoral group and concerned stakeholders over the last couple of weeks.
A coalition, the National Action on Sugar Reduction, recently staged what it termed a peaceful display in Abuja urging the government to increase taxes on sugary drinks and invest the revenue into public health.
The group argued that ‘soft drink taxes are a ‘‘win’’ for Nigerians, adding that consumption of sugary drinks is known to be a risk factor for diseases like type 2 diabetes, heart diseases, stroke and cancers.
But in a swift reaction to the coalition’s campaign, the sectoral group have stated that the ongoing campaign to lynch sugar and use it as a poster boy or silver bullet to solve Nigeria’s healthcare problems is misleading. According to the group: ‘’Citizens’ health is a significant responsibility of all governments, and any action to protect citizens’ health is desirable and should be supported. But the false attribution of sugar-related ailments to a single cause or product is wrong”.
CSD sectoral group further stated that the opposing group used data that do not support their argument for the increases in taxes on sweetened beverages.
‘’Firstly, the group agrees that 70 percent of citizens’ medical bills in the country are private expenses and do not involve the government. The call for the government to raise taxes to cover these private expenses is perplexing and inconsistent with best global tax practices that place the burden or incidence of tax on a product to cover the cost to the government of treatment of patients that consume the product”, it argued.’’
Corroborating this position, an economic analyst, Mr Teslim Shitta-Bey argued that the advocates of the so-called sugar tax have argued that, in 2007 Nigerians consumed 9ml per person, and in 2021, they consumed 14ml per person, representing a compound annual growth rate of 3.46 percent, which is only slightly higher than the national population growth rate over the period. Nigerians consume 8kg of sugar per person per annum, which is below the prescribed World Health Organisation’s 9.1kg per person and significantly lower than the United Kingdom’s 30kg or the United State of America’s 46kg per person.
Shitta-Bay also raised greater health concerns about the sugar tax. “Yes, health issue can be connected to economic development. But in this case, there is no justification to use health to rationalise simply because the CSD sector has not violated the regulations”, he said.
Drawing a similar parallel with the tobacco sector case, analysts recalled that the sector also suffered a similar fate. Advertising of tobacco was banned by the industry regulator. Meanwhile, the effects of that were that the smokers migrated to other unregulated substances and drugs, including tramadol and sundry substances.
No doubt, this only made a mess of the health justification by the government as this was inadvertently been promoted because users were forced to move from regulated substances, which had become a part of their social life at that time, to other hard and unregulated drugs due to over regulation.
Similarly, when the cost of carbonated drinks goes up following additional excise tax, consumers may look for alternatives, which the government may not be able to control and access their distribution. For instance, the government cannot control zobo or kunu, which have sugar contents. These products have not been scientifically subjected to factory tests regarding their sugar contents, compared to carbonated soft drinks.
Another greater risk is that most of the unregulated substances, for example zobo and kunu are sold at places where government cannot access let alone control. For instance, the over regulation of drinks like gin made it to come in small sachets but its major distribution and sales is at motor parks where drivers indulge same making a mess of the ‘’Don’t drink and drive’’ regulations. But, that is where you find the greatest concentration of illicit gin.
Controlling sugar consumption is essential but raising taxes is not the solution, experts say. The best way to control sugar consumption is by setting and enforcing regulations around the amount of sugar used in carbonated drinks. In addition, a social awareness programme explaining the consequences of excessive sugar consumption should be made with messages placed on non-alcoholic carbonated drink bottles, like the country’s Chief Medical Officer’s warning on a cigarette pack.
The Federal Government requires revenue, and rightly so. On a net position, government targets a total of N81 billion in collection with the successful implementation of the proposed additional 20 percent Ad-Valorem Excise Tax , but the N10/per litre tax on carbonated non-alcoholic drinks has already led to a 16 percent fall in industry revenue. Shitta-Bey affirmed that the scenario, which would be created, will affect the overall economic productivity that government is trying to protect.
He said that a PwC study shows that the expected revenue government intends to generate from the proposed additional 20 percent Ad-Valorem excise tax is about N81 billion, and a cursory look at the reduction in Value Added Tax, Company Income Tax, and Personal Income Tax, there would be about N200 billion unclaimed tax being threatened, which is not good for the economic recovery policy of an emerging market economy like Nigeria. The meaning is that the government would not meet its desired increased net revenue target from the sector in 2022/2023.
In essence, what this portends for the system is such that a position known as the Cobra effect is forced on the government such that its solution is worse than the original problem.
