SSB tax: Why stakeholders demand proper legislative framework

Though effective implementation of SSB tax has been a major source of advocacy in the last few years; the demand rather than wane, has continued to rise. YEJIDE GBENGA-OGUNDARE reports the unending clamour to have an adjustment from N10 per litre to N150, with a window for further adjustment if inflation bites. 

Following the introduction of the Finance Act of 2021, which makes provision for excise tax, applicable to non-alcoholic, carbonated and sweetened beverages, the Federal Government has commenced the implementation of tax on Sugar Sweetened Beverages (SSB) which levies ₦10 on each litre of all non-alcoholic and sugar sweetened carbonated drinks.

SSBs are non-alcoholic beverages containing sugar; these include any liquid, powder or other concentrated forms that contain natural or added sweeteners. It is not limited to and includes various forms of sugars like brown sugar, corn sweetener, corn syrup, dextrose, fructose, glucose, high-fructose corn syrup, honey, lactose, malt syrup, maltose, molasses, raw sugar and sucrose including soft drinks, juices (even 100 percent juices, nectars, sweetened coffee, sugar cane juice, sweetened tea, energy drinks, and flavored dairy.

This is not only to make money for government and help it in financing Nigeria’s health sector but also help curb the excessive consumption of sugars as part of efforts to improve on population health, especially in the prevention of non-communicable disease (NCD) like diabetes and chronic kidney disease.

SSB tax is not peculiar to Nigeria; 54 countries, five of which are in Africa, have introduced SSB tax with the primary focus on the health benefits of imposing a sugar tax, while the secondary benefit is the use of the funds as a source of domestic resource mobilisation, particularly in low and middle income countries where the fiscal space is very tight and the health sector is underfunded.

When President Muhammadu Buhari signed the Sugar-Sweetened Beverage (SSB) tax into law as part of the 2021 Finance Act to be implemented in 2022, a tax enforcement structure and timeline for implementation was not determined but implementation began in July 2022. However, according to advocates, this has, in no way, made any difference as it remains insignificant in cost to affect people to the extent of dissuading them from taking SSB products

Many organisations like Gatefield Impact and the NASR worked for the implementation of the SSB tax in Nigeria in collaboration with the Ministry of Finance and Ministry of Health with regular engagement with the National Assembly to put the issue on the agenda. And they couldn’t hide their joy when government approved the implementation, describing it as a win for public health and the Nigerian people which came as a result of collaborative endeavors of diverse stakeholders, including members of NASR coalition, other public health groups and the academic research community.

But aside implementation, stakeholders have continued to express concern over the status of implementation and factors required for successful implementation. They argue that effective policy implementation is critical in bridging the gap between policy promises and policy outcomes. They have also argued that SSB tax requires clearly defined action plans as systematic implementation approach is crucial to the achievement of the public health objectives of SSB tax in Nigeria.

 

Call for increase of SSB tax 

However, while some are still condemning the implementation of SSB tax and opposition is on the rise; the advocacy has gone beyond whether it should be implemented or not and has moved to need for the Federal Government to increase the value of SSB tax from ₦10 tax a litre to ₦150 per litre.

The Corporate Accountability and Public Participation Africa (CAPPA) has moved its advocacy beyond the implementation of SSB tax to the call for an increase. At a faith community enlightenment workshop organized by the Institute of Church and Society, an arm of the Christian Council of Nigeria with support from CAPPA, the need for an increase in tax was a major demand.

At the gathering, it was said that the ₦10 tax a litre on SSB is not effective enough and not serving the required purpose, because it was seen as not reducing the intake of such products nor the risk to public health.

CAPPA listed reasons why the ₦10 tax a litre on SSB is allegedly ineffective and inefficient, which include the tax not being indexed for inflation, the rate being too small to have impact and the fact that custom collects tax and remits to Federation account, making it difficult to be used for health purposes.

It subsequently demanded that “the ₦10 tax a litre on SSB products must be moved to ₦150 a litreand adjusted for inflation from a proper legislative framework”.

But it is not just CAPPA that believes that the SSB tax in Nigeria is ineffective. A 2019 report by the Task Force on Fiscal Policy for Health titled, ‘Health Taxes to Save Lives,’ claims that raising the price of sugary beverages by increasing excise taxes, reduces consumption and saves lives.

Dr. Olumide Okunola, a Senior Health Specialist at World Bank said ₦10 per litre SSB tax in Nigeria is not significant enough to change behaviour and suggested an upward review.

He also asked that the Finance Act be improved to address how the generated SSB tax will be utilised, adding that advocacy should go beyond SSBs to focus on the entire pro-health taxes which include alcohol and tobacco and the phased increase in the proportion of pro-health taxes should also be reintroduced.

He emphasised that the SSB tax is too low to achieve deterrence from consumption of unhealthy products, reiterating the call that the percentage should be increased to effectively reduce consumption of SSBs.

 

SSB tax will raise —FG 

In August 2023, the Federal Government expressed its readiness to raise tax on sugar-sweetened beverages (SSB) from the current rate of 10 percent to 20 percent.

Chukwuma Anyaike, the director/head, public health department, Federal Ministry of Health, acknowledged that the current N10 per litre fails to achieve the goal of reducing consumption and ultimately the burden of NCDs.

He spoke at a pro-Health Tax Policy Campaign on SSB, in Abuja convened by the National Action on Sugar Reduction Coalition (NASR).

“The introduction and sustenance of the tax in Nigeria will also reduce excess consumption of SSBs and thus reducing the burden of NCDs. We are committed to attaining the global best practice at least 20 percent of the final retail price on all SSBs as the current 10 naira per litre price fails to achieve that,” she said.

She further expressed concern that SSBs were readily available and has been found to be the leading source of added sugar, with Nigeria being the largest consumer of SSBs in the world.

“Excess consumption of sugar-sweetened beverages has become a significant public health concern and a threat to the future generation as its consumption is high among children and adolescents.

“Nigeria is a low and middle-income country where more than 70 percent of the populace pay for health expenditure out-of-pocket and among countries with 77 percent of the global 41 million deaths caused by NCDs,” she emphasised.

Also, Edozie Chukwuma, a representative of NASR, while stressing that sugary drinks remain a leading cause of NCDs like diabetes, cardiovascular diseases as well as obesity which are also fatal, urged the federal government to increase tax on sugary drinks, and enact a pro-health tax that channels revenue from taxation of sugary drinks to funding of healthcare.

He said, “WHO recommends at least 20 percent to ensure this taxation is passed to the consumers in such a way that it elevates the prices of sugary drinks and ensuring they are not affordable, which will force people to choose healthier alternatives.

“If by the consumption of sugary drinks, which is cheap, affordable, and accessible by the middle to low- income earners, people come down with NCDs, it is only justifiable that taxing what is killing Nigerians, the proceeds is used to also alleviate the burden of NCDs.”

 

 Does SSB tax deter? 

SSB tax is not a strange process globally and has been introduced in other countries of the world for the same purpose. The implementation of healthy food policies including SSB taxes, is to help curb the globally-growing rates of obesity, diabetes and other diet-related non-communicable diseases.

According to a study published in The Lancet Planetary Health in 2020, it was revealed that South Africa’s SSB tax, known as, the Health Promotion Levy, was effective in reducing consumption and purchases of taxed beverages within a year of going into effect.

Also, a study published by the University of Washington, Seattle, saw a 20 percent decrease in consumption after it implemented an SSB tax in January 2018, and the decrease in low-income communities was even more significant.

 

Demands

Aside increment, CAPPA is asking for more.  The organisation asked the Federal Government to create a proper legislative framework that will have a provision that will make the tax adjustable for inflation.

It also wants the authorities to design a robust framework for the utilisation of the earmarked funds from the SSB tax at the national and sub-national level, and monitor the state governments to ensure value for money and adherence to the guidelines.

It further asked the Federal Government to create a process that will ensure that all pro-health taxes are mainly allocated to the health sector.

CAPPA added that based on research by UNICEF, it has been established that the food and beverage industries always opposed the tax policy on SSB in countries where it had been implemented as they are concerned with their profit maximisation, and use various tactics to evade the tax and resist the process.

It therefore asked government to put in place a robust process of informed response to dispel industry myths and arguments through precise and concise framing of messages on SSB tax policy as a public health priority, effective intergovernmental and multisectoral engagement in the implementation of the tax policy.

Also, it asked the government to consistently emphasise that the policy could be a win-win for public health in addition to ensuring absolute transparency with respect to their ties with the SSB industry, including full disclosure of interest regarding physical and virtual meetings that involve SSB industry.

CAPPA finally asked policymakers to continue to work on improving the tax design and tax rate in response to recent developments, adding that such efforts should leverage on recent empirical evidence and experiences of SSB tax implementation in other countries where the process has been successfully implemented.

It called for focus on changes in macroeconomic indicators, especially one that involves creating a coalition that involves state and non-state actors, civil society organizations, academia and other stakeholders that are critical for the successful implementation of the SSB tax policy.

It further highlighted the need for government to invest in empirical research and use evidence-based information to counter arguments, especially from SSB industries.

 

Final word 

Stakeholders are arguing that in order to improve health financing in the country, legal and regulatory frameworks need to be revised. They also contend that efficient utilization of resources could be improved through strategic purchasing arrangements and strict oversight.

Pointing at the challenges facing the target goals, they claim that “All health financing mechanisms in Nigeria are performing at suboptimal levels. Resources are not equitably allocated or efficiently used to minimize wastage. Quality of services are perceived to be substandard, and individuals and households are not protected from catastrophic health expenditure.

“Given current situations of major health financing mechanisms in Nigeria in terms of health systems goals of efficiency, equity, quality of care and sustainability, financial risk protection for all citizens cannot be achieved.

“There are needed changes that must occur in order to improve health financing and ensure that Nigeria is on the right trajectory to achieving UHC. Key stakeholders in health financing, and decision makers that drive policy formulation and implementation need to make these changes in collaboration with non-health sectors”.