CPPE warns Abuja’s new tax policy wrong to impose 40% duty on imported vehicles
By Jeph Ajobaju, Chief Copy Editor
Abuja’s plan to raise taxes on alcoholic beverages, imported vehicles, and single-use plastics will cost sales and jobs, the Centre for the Promotion of Private Enterprises (CPPE) has warned.
In the new tax regime, N75 per litre will be charged on beer, stout, and imported wine, and the new excise duty on beer and stout will rise to N100 per litre in 2024.
But CPPE Chief Executive Officer Muda Yusuf warned it is insensitive of policymakers to impose a 40 per cent import duty on vehicles in an economy without a mass transit system.
He said the taxes will also have a negative impact on industrialisation and inflation, citing construction and transportation as sectors vulnerable to fiscal policy-induced downside risks.
“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 and sustaining current investments in these sectors would be a herculean task,” Yusuf explained in a statement.
“These policy measures failed to reckon with the multifarious challenges which industry operators are currently grappling with.
“The implications for the sector include a drop in sales, loss of direct and indirect jobs, risk of decline in profitability and shareholder value and elevated risk of smuggling products.”
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High transportation costs, increased smuggling
Yusuf insisted there is no justification for increasing vehicle import duty to 40 per cent. He cited the foreign exchange (forex) impact and warned the implications include high transportation costs and risk of increased smuggling, per reporting by Nairametrics.
“It is therefore insensitive of policymakers to impose a whopping 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, especially for the middle class.”
And an import duty of 45 per cent on iron and steel products stokes the high cost of construction of public and private properties, he added.
Yusuf counselled fiscal policy measures should ensure a good balance between objectives of revenue generation, boosting domestic production, enhancing the welfare of citizens, and promoting economic growth, among others.
Backstory
The federal government in April introduced the new set of taxes on alcoholic beverages, imported vehicles, and single-use plastics in its tax regime.
It also revised and added to the list of items banned from importation.
Under the new tax, N75 per litre will be charged on beer, stout, and imported wine; and excise duty on beer and stout will rise to N100 per litre in 2024.
Additional taxes are to be levied on motor vehicles with a 2 per cent tax on 2-litre engine vehicles and 4 per cent on 4-litre engine vehicles.