Deputies at the national assembly on Monday 29th July 2019 converged an emergency extraordinary session in the 2019 legislative year. This came at a time when issues surrounding alarms on excise tax on alcoholic beverages as a result of the Banjul Breweries saga.
According to the national assembly research stated the approved estimates of the 2019 fiscal year which came into effect on January 2019 brought an increment on taxation of goods especially on alcoholic beverages. It was revealed that Banjul brewery is the sole beer-producing company in The Gambia. The company established by a Gambian called John Blain in 1975. The company made its first production in 1977, and after 42 years of production, it has gained national and international recognition with several awards to its name.
According to sources, the main economic effect the excise tax has on producers of beers is on growth and sales of their products and increment of prices and government revenue generation. Since the increment of the excise tax to 75% and 15% with other taxation on the beer producing company, the sales of products of Banjul breweries, the sales of products of Banjul breweries have dropped drastically due to low sales volumes.
The 75% increment in taxation on alcoholic beverages has caused an increment in the prices of the products. A Banjul brewery has added 59.10 on the price of their products. As a result, wholesalers could not buy as much quantity as they used to and this has led the consumption capacity of consumers to drop. This can be attributed to the increase in price as their purchasing power cannot allow them to buy the volume as they use to.
The excise tax may result in low revenue that the government will earn if it continues. This is because the tax reforms have made alcohol-producing companies to consider downsizing and even closing their business if the trend continues. This will have a negative impact on Gambia’s economic since Banjul breweries are an important stakeholder in the economy. Last year, the company alone paid D132 million to the Gambia revenue authority which was a plus to the economy.
Banjul brewery employs around 200 staff, that in this year, 18 casual staff were laid off due to the unfavorable tax climate. The trend continues, wholesalers and retailers might have no other option but to lay off their staff.
The increment in excise tax has contributed to the smuggling of illicit alcohol into the Gambia. The country stands to lose revenue in the illicit alcohol trade because it cannot monitor the activities to raise revenue.
“The Gambia is a peaceful country and opens for business and creates rooms for investors from all over the world to come, expand and play their role in national development. Foreign investors examine and measure the sustainability of companies in the Gambia, taking into consideration the tax climate amongst other things. Banjul breweries being existence for 42 years is an example and motivating factor for foreign investors. If such companies close their businesses due to the high rate of tax, it might discourage other investors from venturing, or even cease to invest in businesses in the country. This year in Niger, Braninger, the only producing company in Niger had to close down operations due to high taxation and low sales”.
The Minister for Finance and Economic Affairs Mamburay Njie in laying down the motion before deputies for consideration and adoption of the proposed revised excise tax on alcoholic beverages, said the motion is made in accordance with section 149 of the 1997 constitution of the Republic of the Gambia which he said requires the approval of the national assembly before any tax could be imposed, altered or revised.
Njie said that it could be recalled that the increment on excise tax on alcoholic beverages as part of the policy proposal imbedded in the appropriation bill 2019 that was approved by deputies in 2019 to be effective on January 2019.
He said that the increment on the said excise tax which was proposed by the ministry of finance in good faith and approved by the assembly came with its own challenges and unrealistic for implementation and therefore created and continues to create challenges in the industry. This he said was the reason why his ministry together with stakeholders held several consultations on the effects and challenges on the implementation of the approved rate on the excise tax, with a view of resolving the matter amicably in the supreme national interest.
He commended the assembly members and key stakeholders in resolving the challenge associated with the introduction of a new excise tax rates on alcoholic beverages and discuss ways of putting this issue to rest. He noted that the approved new excise tax was in no way an intended target of a specific sector but rather propelled by a growing need to initiate social safety net for the youth from the negative effects of the alcohol abuse due to lower price. He added that road safety over the years has already been compromised by drunk driving mostly youth. These and many other reasons he said were behind the proposal before the assembly to increase the excise rates on alcoholic beverages in December 2018.
The consultation between stakeholders he said resulted in a more broad-based resolution of the matter widely deliberated upon and carefully evaluated. Njie reiterated that if there is anything this situation has taught them as policymakers, it is the need for further consultations on matters affecting different stakeholders and the support of the assembly and stakeholder in addressing issues that affect the country’s socio-economic development. He called and urged the assembly to consider and approved the revised excise tax on alcoholic beverages.
After the laying of this paper by the minister, deputies took turns to comment before it was finally considered and adopted.