Manufacturers decry planned introduction of tax stamp system for excisable products

The Federal Inland Revenue Service (FIRS) has defended the Federal Government’s borrowing strategy, insisting that debt remains a legitimate tool for growth and infrastructure financing, not a sign of crisis. He announced that Personal Income Tax (PIT) and Company Income Tax (CIT) reforms will take effect from January.

However, manufacturers have expressed disappointment over the imminent introduction of a Tax Stamp system for excisable goods.

Speaking on the government’s fiscal strategy while fielding questions from State House Correspondents, yesterday, FIRS Chairman, Zaccheus Adedeji, said the administration of President Bola Tinubu ended the practice of Ways and Means financing through the Central Bank of Nigeria (CBN), converting the facility into a structured federal loan.

According to him, the government now services the debt through both principal and interest repayments, a measure he said contributed to stability in the economy and eased pressure on the exchange rate.

“Borrowing is not a problem; it is part of every viable nation’s ecosystem. No country survives entirely on its own revenue. When the government borrows from banks, it pays interest; banks pay salaries from that, and taxes are collected from their profits. It is a cycle that sustains continuity,” he explained.

Responding to criticisms that government continues to borrow despite improved revenue performance, the tax chief insisted that borrowing is part of every national budget.

IRS chief added: “A budget has three pillars: expenditure, revenue, and loans. If my expenditure is N100,000, revenue is N90,000, and borrowing is N10,000 in line with what is approved by the National Assembly, what is wrong with that? No country survives solely on revenue.

“Borrowing to fund infrastructure, such as roads, yields future tax revenues from businesses and individuals, who benefit from those projects. It is a sustainable approach,” he said.

Adedeji also confirmed that from January 2026, PIT and CIT reforms would be rolled out to expand Nigeria’s revenue base, in line with the Tinubu administration’s drive to reduce overreliance on borrowing.

In another development, the Director-General, Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, said the proposed Tax Stamp system was predicated on the supposed benefits of curbing smuggling and counterfeiting, enhancing transparency and traceability in the excise regime, as well as supporting revenue growth.

He noted that, as was stated in 2018 when the Tax Stamp was initially suggested to the government and was roundly rejected, the fleeting proposition was typically the refrain of vendors who propose tax stamps as a measure against illicit trade.

While the efficacy of this measure is yet to be validated, findings indicate that tax stamps portend significant adverse implications without tangible benefits.

Adding that the proposed Tax Stamp system warrants careful reflection, he said, while the intention is understandable, evidence around the world shows that the system often imposes heavy compliance costs, creates operational bottlenecks and yields limited incremental revenue.

He said, contrary to the Tax Act 2025, which provides businesses, especially small and medium industries (SMIs), with relief from multiple levies, the introduction of a tax stamp system will claw back these gains by imposing a new ‘hidden tax’ on industries under the guise of compliance.

“Ultimately, high logistical costs and risks associated with tax stamps primarily benefit the vendor, not the government or industries. There is a tendency that the Nigerian market risks an upsurge in illicit trade, which will erode government revenue, harm legitimate businesses, and jeopardize consumer safety.”

Noting that producers and importers will raise prices to recover compliance costs, further straining consumers and potentially driving them toward cheaper, illicit alternatives, he reminded the government that it has already invested in home-grown digital systems that can deliver full visibility of excise operations.

Adding that it also presents a great risk to industry competitiveness, he regretted that it would also cause increased production costs and reduce consumer demand, as well as create revenue loss and higher costs for manufacturers.

“There would be increased circulation of counterfeit goods, causing significant economic and operational burdens, job losses across the value chain, deter investments, stifle innovation and discourage new market entrants,” he said.

Citing countries that introduced the systems in the past, including Kenya, Tanzania and Uganda in Africa, he said it triggered multiple legal disputes, high compliance costs, public resistance, illicit trade, operational strain on Small and Medium Enterprises (SMEs) and reduced competitiveness compared to neighbouring countries.

Internationally, he noted that the United Kingdom recently reformed its tax stamp regime, recognizing it as outdated, costly, ineffective and confusing for businesses.

“Tax stamps are only effective in limited contexts with a very strong enforcement capacity and government subsidies. In most emerging markets, they increase costs, shrink formal markets and encourage illicit substitutes,” he warned.

Reiterating manufacturers’ commitment to excise contributions, while firmly maintaining their position on deliberate private–public sector efforts to co-create a conducive operating environment for industries to thrive, he expressed worry that the policy was coming at a time industrial operators were already grappling with rising excise rates, high energy prices, inadequate energy supply and high inflation, making the additional burden of implementing tax stamps a serious threat to industrial sustainability.

Calling on the government to be wary of and reject any persuasion to roll out or implement this policy in whatever guise, he asked it to instead rely on existing digital systems (EDS and e-invoicing), which already provide end-to-end tracking and transparency, avoiding duplication and unnecessary vendor-driven solutions. (The Guardian)