Buhari Approves Tax Hike on Alcoholic Drinks, Cigarettes

By Dipo Olowookere

President Muhammadu Buhari has approved the upward review of excise duty rates on alcoholic beverages and tobacco.

It was gathered that the President has also granted a grace period of 90 days to all manufacturers before the commencement of the new excise duty regime.

This information was confirmed in a statement issued on Sunday in Abuja and it takes effect from Monday, June 4, 2018.

A statement signed by Oluyinka Akintunde, Special Adviser on Media and Communication to Minister of Finance, Mrs Kemi Adeosun, explained that the new excise duty rates were spread over a three-year period from 2018 to 2020 in order to moderate the impact on prices of the products.

However, there is no increase in excise duty of other locally excisable products.

It was explained that the new excise duty regimes followed all-inclusive stakeholder engagements by the Tariff Technical Committee of the Ministry of Finance with key industry stakeholders.

According to the Minister, the upward review of the excise duty rates for alcoholic beverages and tobacco was to achieve a dual benefit of raising the Federal Government’s fiscal revenues and reducing the health hazards associated with tobacco-related diseases and alcohol abuse.

The TCC recommended the slight adjustment in the excise duty charges after cautious considerations of the government’s Fiscal Policy Measures for 2018 and the reports of the World Bank and the International Monetary Fund Technical Assistance Mission on Nigeria’s Fiscal Policy

The effect of the excise duty rates adjustment on trade and investment was also assessed by the Federal Ministry of Trade and Investment and it adopted the recommendations of the TTC, the statement explained.

Furthermore, peer country comparisons were also carried out showing Nigeria as being behind the curve in the review of excise duty rates on alcoholic beverages and tobacco.

Following the President’s approval, the new excise duty rate on tobacco was now a combination of the existing ad-valorem base rate and specific rate while the ad-valorem rate was replaced with a specific rate for alcoholic beverages.

For Alcoholic Beverages, the current ad-valorem rate will be replaced with specific rates and spread over three years to moderate the impact on prices. This will curb the discretion in the Unit Cost Analysis (UCA) for determining the ad-valorem rate & prevent revenue leakages.

For Tobacco, government said it will maintain the current ad-valorem rate of 20 percent and introduce additional specific rates with the implementation to be spread over a three-year period to also reasonably reduce the impact on prices.

Under the newly approved excise duty rates for tobacco in addition to the 20 percent ad-valorem rate, each stick of cigarette will attract a N1 specific rate per stick (N20 per pack of 20 sticks) in 2018 with N2 specific rate per stick (N40 per pack of 20 sticks) in 2019 and N2.90k specific rate per stick (N58 per pack of 20 sticks) in 2020.

Nigeria’s cumulative specific excise duty rate for tobacco was 23.2 percent of the price of the most sold brand, as against 38.14 percent in Algeria, 36.52 percent in South Africa and 30 percent in Gambia.

The new specific excise duty rate for alcoholic beverages cuts across Beer & Stout, Wines and Spirits for the three years 2018 to 2020.

Under the new regime, Beer & Stout would attract N0.30k per centiliter (Cl) in 2018 and N0.35k per Cl each in 2019 and 2020.

Wines would attract N1.25k per Cl in 2018 and N1.50k per Cl each in 2019 and 2020, while N1.50k per Cl was approved for Spirits in 2018, N1.75k per Cl in 2019 and N2.00k per Cl in 2020.

The Minister added that the new excise duty regimes are in line with the Economic Community of West African States (ECOWAS) directive on the harmonisation of member-states’ legislations on excise duties.

It would be recalled that the ECOWAS Council of Ministers had at its 62nd and 79th Ordinary Sessions in Abuja in May 2009 and December 2017, respectively, issued directives on the harmonisation of the ECOWAS Member States’ Legislations on Excise Duties.

The directives seek to harmonise member-states’ legislations on excise duties of non-oil products and also stipulate the scope of application, rate of taxation, taxable event and amount.