Some weeks ago, the Federal Government announced that it will commence a new regime of increased taxes on certain goods. As we begin the second quarter of the year, the commencement date falls within it; as from June 4, consumers of alcoholic beverages and tobacco products will pay more for them, as their prices will increase following government’s new tariffs regime. This came on the heels of Federal Government’s approved amendment to the excise duty rates for the affected products.
By this, we expect that the products will have adjustments on their selling price. Thus,under the new tariffs regime, the duty rates paid on the affected products have been marginally increased. According to the Minister of Finance, Kemi Adeosun, government has also granted a grace period of 90 days to all local manufacturers of the affected products before the implementation of the new duty rates will commence.
According to reports, the new regime of tariffs is the outcome of an all-inclusive stakeholders engagement by the Tariff Technical Committee, TTC set up by the ministry in collaboration with key industry stakeholders. In coming up with the new tariffs, the TTC took into consideration government’s fiscal policy measures for 2018 as well as reports of the World Bank and the International Monetary Fund, IMF.
Incidentally, there is a pilot period in order to use same to assess the value of the increment. Consequently, the new rates will cover a 3-year period, from 2018 to 2020. This timeframe will help to moderate the impact of the new tariffs on prices of the products. Beyond the health hazards associated with tobacco-related diseases and alcohol abuse, the Finance Minister explained that raising government’s fiscal revenues played a part in the decision.
Reports from the ministry of finance and the Nigeria Customs Service, the approved new duty rates which will take effect from first week of June for tobacco is as follows: each stick of cigarette will henceforth attract N1 or N20 per pack of 20 sticks in 2018. But from 2019-2020, tobacco will attract duties of N2 specific rate per stick or N58 per pack of 20 sticks. In rationalising this, the Finance Minister said that currently, “Nigeria’s cumulative specific excise duty rate for tobacco was 23.2 percent of the price of the most solid brand as against 38.14 percent in Algeria, 36.52 percent in South Africa and 30 percent in the Gambia”.
The duty rates for alcoholic beverages cut across all brands, including beer (lager and stout), wines and spirits for the three years (2018-2020). Under the new regime, lager and stout will attract 30 kobo per centilitre in 2018, and 35k per cl in 2019 and 2020. Similarly, wines will attract N1.25k per cl in 2018 and N1.50k per cl each next year and 2020, while N1.50k per cl has been approved for spirits in 2018.
The new rates are said to be in line with the directive of the Economic Community of West African States (ECOWAS) Council of Ministers on the harmonisation of member-states legislations on excise duties at its 62nd and 79th Ordinary Sessions in Abuja, May 2009 and December 2017, respectively. In both meetings, the issues discussed included the need to explore non-oil products to shore up revenue generation, stimulate the scope of application and rate of taxation.
From all indications, the government seems to be on the right side of history on this. This could partly explain why there has not been noticeable noise over this increment. Therefore, we commend the government for raising the tariffs on the affected products whose excessive consumption could dispose people to some life-threatening ailments including heart related ones, cancer and simply alcohol addiction. Government’s decision is in line with its duty to protect the welfare of the citizens and ensure they live a healthy life.
Although we doubt if this marginal increment will substantially dissuade people from smoking or drinking, it is our hope that for whatever it is worth in the case of tobacco, some of the taxes will be used to build heart related hospitals to manage the effects of second hand smoking. Government should also be careful not to be seen to be anti investment by over taxation. It is easy to compare our rates to those of other countries, but we know that statistics depends on what you want to use it to defend. More importantly government must ensure judicious use of every extra naira collected from Nigerians.