Soft drinks tax is a good idea

I like how the new Duterte administration is planning to do many things past administrations thought were too difficult to do. Tax on soft drinks is one good example. It is an idea whose time has come.

Finance Secretary Sonny Dominguez has put forward the proposal to slap higher taxes on sugar-sweetened beverages such as soft drinks, fruit drinks, sports drinks, sweetened tea and coffee drinks, energy drinks and all other non-alcoholic beverages that are ready-to-drink and in powder form. Raising revenues is one good reason for doing this, but the best reason is simply because this is good for the health of our people.

A higher tax on soft drinks and similar products has now taken the same urgency as the higher tax imposed on cigarettes and other tobacco products. It is a sin tax. Consumption is strictly recreational... optional. And the habit of consuming the products cause adverse health problems.

Imposing this sin tax also has the added benefit of raising revenues that can be given to finance the health care needs of our people, as is the case with the tobacco sin tax. The DOF had computed a windfall of as much as P35 billion from soft drinks alone coming from the health measure.

On the other hand, the products that would not be covered by the added tax include natural fruit juices, natural vegetable juices, yogurt, milk products, meal replacement beverages or medical food, as well as weight loss products. We can expect an increased demand for products like “buko juice” and help improve the economic condition of our farmers.

The soft drink companies are expected to oppose this new tax measure. They will say that workers in the soft drink industry, their dealers and sari sari store owners, as well as our local sugar industry will be adversely affected.

But that is all bunk. All those workers will find alternative sources of income from selling more healthful beverages. As a study I cited in a column last December concluded, experts think “a tax on unhealthy foods would act as an incentive to encourage manufacturers to change what goes into their products and make them healthier.”

As for our sugar industry, it is probably time to convert most of the land now planted to sugar to other high value crops. Locally produced sugar had been uncompetitive with the sugar produced in neighboring Thailand. This has given rise to smuggling. And the existing bureaucracy to protect the industry is costing us money better spent elsewhere.

But change is coming in a more health conscious market. It is that lifestyle change that explains this recent increase in demand for buko juice or coconut water in the US market.

Coke and Pepsi have also been pushing other more healthful drinks and even just simple bottled water. I understand that over time, they expect their sales of non-sugary drinks to overtake that of their traditional soft drinks.

As I reported on that December 2015 column, Pepsi CEO Indra Nooyi decided to refocus Pepsi rather than buck the trend. “Lifestyles have changed,” she notes, “And we have to modify our products.” In that spirit, she’s focusing the company more on water, juices, teas and sports drinks.

As I also wrote in a column for abs-cbnnews.com in Oct. 21, 2012, a paper comparing how Coke and Pepsi managed their product mix noted  “The sharp 35 percent rise in profits owed little to the company’s four core brands: Coke, Diet Coke, Sprite, and Fanta. Instead, Coke got a jolt from the non-carbonated brands that were once treated as orphans by its colacentric management.

“It’s the first good news Coke has had for some time in its battle to make up precious ground against PepsiCo Inc., in the beverage industry’s most competitive rivalry. Getting the noncarb business right will be a top priority… Coke was long reluctant to diversify into any beverages that it feared couldn’t match the lucrative margins of soft drinks.”

It is clear the beverage companies have alternatives to sugary drinks that may be more profitable in a future world of health conscious consumers. A higher soft drink tax will do them a favor now by forcing them to rethink their product line-up.

While the health concerns of developed countries, like the US, over soda consumption seem urgent, it is even more so for countries like ours. Imagine the barefoot boy in a barrio out in a rural area sipping soft drink from a plastic bag. All those empty calories can only aggravate an already serious malnutrition problem.

The soft drinks people will try to present the tax proposal as anti poor. In the San Francisco Bay Area, the proposition for a soft drink tax didn’t do well in poorer neighborhoods. The proposition won overwhelmingly in the economically better off communities that are also more health conscious.

Here at home, soft drink manufacturers argue the poor have little affordable amenities and drinking a Coke or a Pepsi is one of their few luxuries. Why deprive them of that? To protect their health, of course.

The health argument is compelling. As in the case of tobacco, an outright ban is not possible because those addicted to the products will buy at any cost. But consumers of the products should be made aware of the dangers.

Public health policy think tank HealthJustice, recipient of the Bloomberg Award for Global Tobacco Control, welcomes the “soda tax” proposal. “This is definitely a step in the right direction. Three out of 10 Filipinos are obese. Childhood obesity is likewise increasing. It does not help that soft drinks are still very cheap and accessible especially to children in school.”

The World Health Organization has expressed alarm over the increasing prevalence of obesity in the Philippines. The 8th National Nutrition Survey also revealed the percentage of overweight children aged 5-10 in the Philippines has significantly increased. Other supporters include the American Heart Association and the American Academy of Pediatrics.

A study published in the Journal of Public Economics, led by a public health expert from Yale University, found out “there is emerging evidence that small net changes in caloric consumption can lead to substantial changes in the prevalence of obesity over time… it may be possible to effectively reduce weight by targeting a single food item.”

According to the Center for Science in the Public Interest, at least 39 states and the cities of Chicago and Washington DC have small, special taxes on sugary drinks sold in grocery stores and/or vending machines.

Indeed, revenues raised should be specially set aside to enable the Department of Health to more adequately respond to increases in cases of diabetes and other related diseases. Too many cases of untreated diabetes have had horrible consequences, including terminal kidney disease and limb amputations.

A good information program under the auspices of the DOH is also called for. People are just not well informed about the dangers of diabetes and how to avoid or mitigate its consequences.

I am glad the Duterte administration is finally coming around to see the point ignored by past administrations. More and more countries are imposing a higher soft drink tax simply because it is the right thing to do.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco