As part of government efforts to diversify revenue streams, Africa’s biggest economy is mulling the imposition of excise duties on carbonated drinks, a Nigerian minister has said.
“In expanding the revenue base, we have proposed the increase of VAT but there are also other revenue streams that we are looking at,” said Zainab Ahmed, the Minister of Finance, Budget and National Planning.
“Some of them include the introduction of excise duties on carbonated drinks but there is a process to doing these things,” Ahmed added, speaking on the sidelines of the World Bank/International Monetary Fund meetings in Washington DC, United States.
Ahmed revealed additional streams of income identified by the government to help boost revenue base and its plan to ensure citizens pay tax. “There is also a proposal to build tax rates for SMEs. We will also increase the minimum tax level to make it easy for people to plan their taxes,” she said.
Furthermore, the minister denounced the poor tax collection rate in Nigeria saying Nigeria lacks an “adequate” social contract and has “very low tax morale.” She attributes this to the country being largely dependent on oil revenue which makes people not used to paying taxes.
“The government was not asking for or enforcing tax collection and, therefore, taxpayers also were not taking up their civic responsibilities,” Ahmed said.
Presently, Nigeria’s tax revenue to Gross Domestic Product (GDP) ratio remains one of the smallest in the world which implies there exists a strong revenue potential from taxes.
According to a report by CSL Stockbrokers on Nairametrics, Nigeria’s debt position puts the economy at the edge of a fiscal crisis if the government does not find ways to manage its fiscal position.
The firm recommends that this can be achieved by expanding the tax net rather than raising tax rates as tax evasion still remains prevalent in Nigeria.
In addition, transparency and efficiency in the tax collection process would also provide a significant boost for government revenue given that many people and institutions are still outside the tax net.
In line with this, Ahmed said the government is introducing a new measure that would enable citizens to plan their taxes and an orientation campaign, adding that taxes and domestic revenue are very important in an oil-dependent economy such as Nigeria’s.
“We are planning a strong strategic communications process to educate people on why they need to pay taxes,” the minister said. “Because we rely heavily on oil and it is not going to be there forever. So, we have to boost domestic revenue generation and use tax revenue.”
If effected, companies such as the Nigerian Bottling Company (NBC), Rite Foods Plc. and other manufacturers of carbonated/soft drinks and brands – Coca Cola, Fanta, Pepsi, Bigi, etc – will have to pay the new excise tax on their products.