- Nigerians to pay VAT on digital services
- MAN kicks, Insists the economy at risk
BY COBHAM NSA – In its continuing bid to address challenges around dwindling revenue accruing to the Federation Account, the Federal Government insists the newly introduced Sugar tax will not only enhance revenue collection but check worrying health conditions among Nigerians.
Minister of Finance, Budget, and National Planning, Mrs Zainab Ahmed, who announced the introduction of excise duty of N10 per litre on all non-alcoholic, carbonated, and sweetened beverages, said the overall good of Nigerians and the country was taken into serious consideration in reaching the decision.
Giving an insight on the excise duty, which is a form of tax imposed on the production, licensing, and sale of goods during the public presentation of the 2022 budget on Wednesday in Abuja, Mrs Ahmed said the new policy is in the Finance Act signed into law by President Muhammadu Buhari on December 31, 2021.
The Minister, who addressed the government’s critical policy thrust as captured in the Finance Act, said, “There’s now an excise duty of N10 per litre imposed on all non-alcoholic and sweetened beverages. And this is to discourage excessive consumption of sugar in beverages which contributes to a number of health conditions, including diabetes and obesity” in the country.
She further explained the rationale behind the New ‘Sugar Tax’, as being part of efforts to raise excise duties and revenues for health-related and other critical expenditures in line with the 2022 Budget’s priorities.
According to her, the government has also introduced a law requiring foreign companies providing digital services in the country to collect and remit Value Added Tax (VAT) to the Federal Inland Revenue Service (FIRS).
She stated that the new policy is contained in Section 30 of the Finance Act which amended the provisions of Section 10, 31 and 14 on VAT obligations for non-resident digital companies.
“Section 30 of the Finance Act is designed to amend Section 10, 31 and 14 of VAT is in relations to VAT obligations for non-resident digital companies and the mechanism that will be used is to restrict VAT obligations mainly to digital non-resident companies who supply individuals in Nigeria who can’t themselves self-account for VAT.
“So if you visit Amazon, we are expecting Amazon to add VAT charge to whatever transaction you are paying for. I am using Amazon as an example. We are going to be working with Amazon to be agreed to be registered as a tax agent for the FIRS.
“So Amazon will now collect this payment and remit to FIRS and this is in line with global best practices, we have been missing out on this stream of revenue”, the Minister said.
Mrs Ahmed, while offering further clarification on the provisions of the Act, said the new legislation applies to foreign companies that provide digital services such as, “apps, high-frequency trading, electronic data storage, online advertising” among others.
Though acknowledging that revenue currently remains the main fiscal challenge, the Minister said the “government remains committed to the effective implementation of the Strategic Revenue Growth Initiatives (SRGI) to improve revenue collection, expenditure management, and fiscal sustainability.”
“We are optimistic about our ability to finance the budget considering the positive global oil market outlook and the continuing improvement in our non-oil revenues. We shall explore available opportunities for public-private partnerships, concessions as well as climate finance arrangements to fast track the pace of our infrastructural development.”, she further assured.
But reacting to the new policy regime, the Manufacturers Association of Nigeria (MAN) has raised an alarm that the Sugar tax on carbonated drinks would be counter-productive to the nation’s economy.
Speaking to the report commissioned by MAN and detailing the effects of re-introducing excise duty on carbonated drinks, Director-General of MAN, Segun Ajayi-Kadir, said; “I would like to say that the introduction of excise duty of N10/litre on non-alcoholic, carbonated and sweetened beverages, despite its potential overwhelming negative impact, is rather unfortunate.”
For the MAN Director-General, the excise duty tax would affect the sub-sector, which has contributed significantly to the economy and taxes, in spite of the debilitating effects of naira devaluation, and the inadequacy of forex, as well as the COVID-19 pandemic.
He warned that given all available indicators, the development could prove counterproductive, leading to a possible loss of revenue for the government in the long run.
