Revised excise tax turns the sweets industry bitter

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Sugar and sweets producers’ blasts the Ministry of Finance (MoF) on the revised excise tax that is gravely damaging their business.
In the meeting that was organized by their association, Ethiopian Sugar and Sweets Producers Association in collaboration with Alela Promotion Service members have expressed their frustration on MoF, which is responsible for the revision of the proclamation that has become effective as of February.
They said that they have filed their claim with well-developed independent survey that assesses the effect of the revised rate on the sector. “Since August we have been approaching MoF and relevant officers at the ministry while tangible and proper response was not given,” one of the participants at the meeting held at Harmony Hotel said.
The tariff that revised the sugar excise rate has affected their business, according to the participants. The rate has surged up to 50 percent on their cost thus making them uncompetitive in the sector and the sweets that they imports.
They argued that they have created huge job and import substitution besides adding value on the supply chain of agro processing sector and other benefits for the government. “The government has totally forgotten the sector,” they claimed.
They have also criticized the decision of the government on making the proclamation effective without consulting them.
“If the government understands the sector properly, the country shall be one of the major confectionary exporters since the sugar sector is on the good process of expansion. But on the current stage the levy imposed on the sector makes the producers uncompetitive in the global market since its huge compared with other including the regional countries,” Elias Teshome, General Manger of Nib Candy Factory, which is one of the oldest and biggest in the sector, said.
Elias added that some countries who lead the confectionary industry are not necessarily producers of sugar, “For instance Kenya is the lead exporter of confectionary in the region but it is importing sugar for its industries.”
Gezahegn Gebremedhin, an independent consultant who contributed on the survey, told Capital that the excise tax that was revised about ten months has imposed a massive rate on the sweets industry.
The new rate that revised the levy from production to sales has imposed 30 percent, while sugar, which is major ingredient for sweet production, is 20 percent in excise tax. “In general up to a 50 percent price hike on their products has occurred due to the new tax that significantly discourages consumers,” Gezahegn said.
He added that on their survey they identified clearly the effect of the new levy on the market.
“These products are not basic commodity like bread or medicine that buyers would not hesitate to pay if the rate is increased, while sweet product are secondary for the society and therefore can be abandoned unlike primary goods,” he says, “due to this effect the sector production has been affected because the market is not as per the previous trend.”
“According to our sample survey on some manufacturers, their sales have declined by up to 62 percent compared with the period before the revision of excise tax. At the same time they have reduced the volume of raw material by 75 percent due to the market drop,” Gezahegn explained.
He added that the effect shall transfer to the labour that they hired but because of COVID 19 it did not happen. It was recalled that the government imposed that companies should keep their employees in the pandemic situation.
“The effect would have a wide circle that connects from the input producer to retailer,” he added.
He recommended the government to look into the case and protect them that are about 150 industries, which are also contributing to import substitution and some of them are engaged on the confection export.
The country had allocated USD 210 million in 2017 to import sugar and sweet products.
Gezahegn recommended the MoF should revise the levy for the sector since they are engaged in the manufacturing industry, job creation and even a potential to widen the hard currency earning besides substituting the import.
Manufacturers claimed that the government considered them as if they are engaged in luxury business but they argued that it is an absolute misunderstanding.
Gossa Tefera, Tax Directorate Director at MoF, promised that his office will see the case.
But experts from different institutions like Ministry of Trade and Industry said that the sector actors should also work tirelessly to elevate challenges and recommend improving their quality production and capacity.
Mulugeta Yemer, a consultant at LM Group, a consultancy form focused on food and related sector, underlined the idea of boosting their capacity and filling the unnecessary gaps like quality issues that also occur from the sector actors itself.