Photo caption: MAN logo
By Charles Okonji
The Manufacturers Association of Nigeria (MAN) has strongly urges the Federal Government to exercise caution in introducing a Tax Stamp System in Nigeria, as experiences in the international environment shows that tax stamps often hinder local industry, erode gains in tax simplification, and yield a limited revenue impact.
The Director General of MAN, Mr. Segun Ajayi-Kadir, urged the Government not to succumb to the proposed Tax Stamps, advising th Government to strengthen existing digital fiscal tools and border controls to achieve compliance without imposing undue burdens on industy.
Ajayi-Kadir noted that the proposed Tax Stamp System warrants careful reflection and caution, stressing that manufacturers firmly believe that while the intention is understandable, evidence around the world shows that the Tax Stamp System often imposes heavy compliance costs, creates operational bottlenecks, and yields limited incremental revenue.
Arccording to him; “Our members widely welcomed the Laws as they provide a simplified tax framework, harmonize the tax regime and deliver relief to industries, particularly the small and medium-sized industries (SMIs).
“We are therefore disturbed about an imminent distraction from this positive narrative in the form of a possible introduction of a Tax Stamp System for excisable goods. MAN understands that this consideration is predicated on the supposed benefits of curbing smuggling and counterfeiting, enhancing transparency and traceability in the excise regime, and supporting revenue growth.
“As we stated in 2018 when the Tax Stamp was initially suggested to Government and was roundly rejected, this fleeting proposition is 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.
“The introduction of a tax stamp system risks clawing back these gains, effectively imposing a new “hidden tax” on industries under the guise of compliance. Such a measure is tantamount to “giving with one hand and taking back with the other,” undermining the relief granted under the 2025 Tax Act. SMIs, in particular, would bear disproportionate burdens, weakening the Federal Government’s drive to promote local manufacturing and job creation.”
The DG lamented the tax stamp will induce high logistical costs, emphasising that it will primarily benefit the vendor, not the government or the industry.
“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.
“Producers and importers may raise prices to recover compliance costs, further straining consumers and potentially driving them toward cheaper, illicit alternatives.
“It is pertinent to note that Nigerian manufacturers compete with imported brands within AfCFTA and beyond. Introducing additional costs in the form of tax stamp will increase production costs and render locally made products less competitive in regional markets.
“The implementation of a tax stamp system will inevitably raise production costs and discourage local patronage. At a time when households are already grappling with high inflationary pressures, the introduction of tax stamps would push consumers toward cheaper imported alternatives, fuel illicit trade, and risk driving local manufacturers out of the market.
“International studies show that while stamp systems can increase reported excise revenue, the compliance costs (borne by manufacturers) often exceed the marginal revenue gains. In particular, a 2020 academic study from the University of Cape Coast found that compliance costs significantly affect small taxpayers’ profitability and tax compliance in Ghana
“Paper-based tax stamps, in particular, are prone to falsification, making it extremely difficult for consumers and retailers to distinguish between genuine and counterfeit products.
“In the same vein, our experience in other markets equally shows that digital stamps are counterproductive, cutting productivity by up to 40%, and have not reduced illicit trade. So, in all cases, rather than strengthening enforcement, tax stamps have not abated the circulation of counterfeit goods, they undermine both government revenue and the profitability of legitimate industry players”.
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