Tax on Coke: Global Trend, Wrong Intention in Nigeria

The Nigerian social media was few days ago awash with the news on the planned introduction of special tax on carbonated drinks.

Elementary economics teaches that revenue generation, while no doubt being primary, is not the only goal of taxation. Most o'level textbooks put "To discourage consumption of harmful products" as #2 when talking about why government imposes tax.

That should be the reason Coke and other sugary beverages should be taxed (if they must be taxed), and not for revenue. And that is the reason other countries that impose excise tax on sugary products project as reason for taxing them. In fact, excise tax on soft drinks has been nicknamed "sugar tax" in international tax circle.

The reason why other countries impose such special tax on sugary drinks is to check obesity and other health issues associated with sugar.

According to an EY global tax publication, more than 20 countries around the world have introduced tax on soft drinks and other sweet beverages. Examples of countries that have introduced “sugar tax” in the last 4 years include the UK, France, Portugal, Spain, Belgium, Chile, and South Africa..

In the UK, for example, the sugar tax is 18 pence per litre of soft drink with with 5g of sugar per 100ml, and 24 pence per litre for drinks with higher sugar concentration. In other words, the higher the sugar content, the higher the sugar tax.

Unfortunately, if the press quote by the Minister of Finance while hinting on this new tax is anything to go by, Nigeria is doing this for the wrong reason - to generate revenue. That should be secondary. As a matter of fact, in most countries where sugar tax exists, the revenue generated from it is mostly used to sensitize against the social cause they are trying to fight (obesity and other sugar-related health issues in the case of the West). But here, it looks like the government is looking to tax Coke, Bigi etc to fund budget!

NB: All views expressed in this article as with my other articles here, are personal.