Lagos May Impose ‘State Excise Tax’ On Alcohol, Cigarette, Betting

Lagos State government has mulled plans to impose a “State Excise Tax” on harmful goods like alcohol and tobacco as well as betting and gambling. This is contained in the state government budget performance appraisal report for the 1st quarter of 2023, which was obtained by our correspondent on Thursday.

According to the report released by the state Ministry of Economic Planning and Budget, the government recorded a revenue performance of 76 percent (N269,609bn) in the first three months of this year. To increase revenue, the report said the state must focus on improving its currently low tax penetration.

“Lagos State should impose a “State Excise Tax”, particularly on harmful goods like alcohol and tobacco. These taxes can also be imposed on betting and gambling winnings- an industry worth over $2 billion per annum and risingEstablish a Strategic Management Unit to monitor and provide support in delivering all MDA mandates in the Lagos State civil service,” – it stated.

During the period under review, the Lagos State Internal Revenue Service (LIRS) recorded 87 percent performance while Internally Generated Revenue performed at 36 percent.

With increasing investment towards infrastructural development, the report noted that the state government must begin to look towards creating business opportunities around proposed, ongoing, and established infrastructures.

The Government must be a first-tier beneficiary of the economic value created by the infrastructures built, in terms of making informed decisions, enforcing regulations and standard of business conducted, generating tax from value added, coordinated infrastructure maintenance, and improved standard of living of its people as opposed to touting and hawking that has characterized most of the city centers and infrastructure sites.

“There is a need to identify State-Owned asset value through third-party claims, then financialize these assets by issuing asset-backed securitiesThe State must focus on improving its currently low tax penetration,” – the report noted.

The report also revealed that recurrent expenditure recorded a performance of 61 percent (N113,227bn), Capex recorded a performance of 75 percent (N191,686bn), while budget performed at 69 percent (N304.913bn).

While raising taxes on one hand to improve revenue generation, the report suggested that the state government must increase spending on projects with the highest rate of social return to stimulate the economy.

“This will help to balance out the effects of raising taxes which often leads to slow economic growth,” the reported hinted. Total Capital Expenditure closed at 75 percent with Core Capital Expenditure at 79 percent and Repayment at 94 percent. Capital expenditure performance as at Q1 looks promising, and is a reflection of government enormous spending to reduce infrastructure deficits particularly in the areas of transportation, health, and creating a business friendly environment.”

The report further revealed that total external debt as at December 2022 stood at $1.25bn, while total debt stock to GDP was 4.5 percent.

Also, total domestic debt as at December 2022 was put at N807.2bn, while domestic debt to external debt during the same period stood at 69 percent. Similarly, total revenue to total debt stock stood at 71.2 percent.

The debt service to Gross State Income (GSI) ratio in Y2022 is 26.86 percent, a rise of 2.85 percent from Y2021, indicating a good balance between debt and revenue.

“While this may encourage additional borrowing, policymakers must consider the current realities of borrowing costs as global interest rates rise. Our Analysis suggested that the government focus on increasing transparency in debt contracts in order to encourage debt restructuring and build trust among current and future creditor groups,” – the report explained.

Governor, Babajide Sanwo-Olu, in January signed the State’s N1.768 trillion 2023 budget tagged, “Budget of Continuity” into law.

The 2023 Appropriation Bill has a capital expenditure of N1.019 trillion, representing 58 per cent of the 2023 budget. The recurrent expenditure, representing 42 per cent, is N748 billion, which includes personnel cost, overhead and debt services.


About Post Author

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.