Nigerians may face the worst of policy decisions as more job cuts may follow the new tax regime signed by President Muhammadu Buhari, according to the Chief Executive Officer of the Centre for Promotion Private Enterprises, Muda Yusuf.
Buhari approved new Fiscal Policy Measures (FPM) for 2023 in a Circular dated 20 April 2023 signed by Zainab Ahmed, Minister of Finance, Budget and National Planning.
The FPM introduced additional excise taxes ranging from 20 per cent Ad valorem Tax and N75/litre on Beer and Stout; Wine Production: 30 per cent Ad Valorem and N75/litre; Spirit and other Alcoholic Beverages: 30 per cent Ad Valorem and N150/litre
Import Adjustment Tax (IAT) levy that was introduced on motor vehicles of 2000 cc to 3999 cc at 2 per cent. For vehicles of 4000cc and above, the tax will be 4 per cent while vehicles below 2000cc, mass transit buses, electric vehicles, and locally manufactured vehicles are exempted.
This translates to import duty of 42 per cent or 44 per cent depending on the engine capacity of the vehicle.
Tobacco tax was reviewed to 30 per cent Ad Valorem and N8.20k per stick. FG will charge by way of excise duty on Single Use Plastics (SUPs) like plastic containers, films and bags at the rate of 10 per cent.
“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.
“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, some of which include the following.
“Weak and declining consumer purchasing power. Naira exchange rate depreciation which is taking a huge toll on cost of production. High energy cost Multiple taxes and levies already being imposed on the industry players. Risk to jobs in the sector and its extended value chain including millions of MSMEs in its distribution and marketing chain. Downside risk to manufacturing sector outlook in the Nigerian economy,” Yusuf said in an emailed reaction.
The CPPE boss said the new tax regime will affect businesses and could lead to job losses.
“With a 30% Ad Valorem tax and a specific tax of N75/litre, most wine industries operating in the country may have to shut down. It is ironic that rather than support local wine producers to be more competitive and create more jobs, the government has opted to impose even higher taxes on them.
“Millions of farmers supply local inputs such as grains to the sector may lose their livelihoods. Risk of decline in profitability and shareholder value. Elevated risk of smuggling of the products,” he said on tax on alcohol and spirit.
He said it is insensitive of policy makers to impose a whooping 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, particularly for the middle class.