SIN TAX IN NIGERIA: TO BE OR NOT TO BE?
Sin tax: – a tax on items such as alcohol or tobacco
- An excise or sales tax specifically levied on certain goods deemed harmful to society and individuals.
If you sin, you must pay, this time not with blood, but with the universal currency- Money.
Halt your moral compass for a bit; while alcohol and beer sound like sin, snacks and soft drinks are included in the list of products to be heavily taxed. Isn’t that a challenge for a coke addict like me?
President Muhammadu Buhari in June 2018 approved an increase in excise duties on tobacco and alcoholic beverages. The Government was trying to stay out of recession by increasing non-oil generated revenue. Higher taxation was considered as an option thanks to Lagos state which has been realizing billions of Naira from taxes alone and exceeding its annual revenue target.
The implementation of the new excise duties kicked off on the 4th of June last year (After a 90 – days ‘winter is coming’ break was given to the companies affected). The increase in the rates of Tobacco were to span a period of three years, at one (1) Naira per stick for 2018, two (2) naira per stick in 2019, and two naira, ninety kobo (2.90) per stick in 2020. Beer & Stout rates were also to increase over a period of three years. In 2018, it was increased to thirty (30) kobo per centiliter in 2018 and thirty-five (35) kobo per centiliter in 2019 and 2020.
These increases aim to serve two purposes: To discourage/regulate abuse of tobacco and alcoholic beverages and to generate revenue. The reasons however appear ironical as in reality; a reduced use/sale of the ‘sinful goods’ translates adversely to revenue generation. So, the economy in fact needs the further and continuous patronage and consumption of these products in order to thrive.
The message basically seems to be saying ‘we want you to stop smoking and drinking which is why we are implementing increased taxes’ but rather subtly prodding “Go on, you adamant people, drink and smoke all you want, we need the money. Do it for your country’s’ economy”. Isn’t that paradoxical?
Implementing sin tax will lead to the following:
- Reduction of societal menace: Hopefully, the products become expensive enough that not every Tom, Dick and Harry can afford to buy a box of cigarettes or crate of alcohol.
- Increased revenue: Of course, taxes equal revenue and higher taxes means even higher revenue accruing to the government which means they will be able to get more work done (hopefully). The International Monetary Fund (IMF) actually even advised that the excise duty on tobacco should be raised to N5 per stick (Aka, you can’t smoke and be broke, lol).
- Health and environmental implications: The IMF stated that Nigeria is the highest alcohol drinking country in Africa. This is not quite surprising putting clubs, bars and owambes into consideration. Sin taxes have proven to be effective in curbing diseases and health problems arising from prolonged use of the ‘sinful goods’ including lung cancer, liver and kidney problems. If the government really cares about our health, so should we.
Shall we now continue in sin that Tax may abound?
Companies have in recent times been ‘fleeing’ the country in search of ‘greener pastures’ because of electricity and other peculiar factors. Annual increase of taxes on tobacco and alcohol production and distribution companies in Nigeria (think Guinness and Nigerian breweries), may lead to the closing down of some of these companies and consequentially loss of jobs for many Nigerians.
Also, an increase in sin taxes may result in increase in the price of tobacco and alcohol but this does not guarantee a change in the lifestyle of consumers. If the main aim of the sin tax is to eliminate unhealthy goods from the country, increased taxes may not be enough.
But is that the aim? Your guess is as good as mine.
Yetunde Akanbi is a hardworking, passionate and result oriented lawyer with demonstrable leadership, problem solving and people skills. She writes occasionally and enjoys reading and editing. Yetunde is presently a Legal Officer at the Ministry of Justice, Ekiti State and is open to opportunities that will enable her grow professionally. Her leisure interests are photography, PR and traveling.