Beverage tax to hurt consumers – COL Financial

MANILA, Philippines - A plan of the Duterte administration to impose tax on sugar-sweetened beverages including softdrinks is seen hurting consumer companies.

In a report on the potential tax plan, COL Financial said companies that could be affected include Universal Robina Corp. (URC) of the Gokongwei group, Pepsi-Cola Products Philippines Inc., Del Monte Philippines and RFM Corp.

“If the bill is passed, the resulting increase in prices will significantly hurt demand for sugary drinks and thus affect companies that sell these in the domestic market. Assuming that companies fully pass on the excise tax, we estimate that prices of sugar-sweetened drinks could increase by around 15-to 20-percent for lower volume products such as those 500 ml and below and 30-to 40-percent for higher volume products one liter and above, said Andy dela Cruz, research analyst at COL Financial.

The bill seeks to curb consumption of sugary drinks to promote health as well as to offset foregone revenues from the country’s proposed tax reform.

As such, the Duterte government filed a new bill last June 30 that will impose an excise tax for sugar sweetened beverages.

“The bill, if passed, seeks to insert a section in the National Internal Revenue Code of the Philippines that will impose a P10 excise tax, which will increase by four percent every year thereafter effective Jan. 1, 2017, on sugar-sweetened beverages per liter of volume capacity,” COL said in its report.

However, COL Financial stressed that nothing is final yet.

“We emphasized that the bill has only been filed in Congress and is still in the process of approval,” COL said.

A similar bill was filed in the 16th Congress but did not reach plenary discussions due to the lack of material time.

In the meantime, sales and profits of these companies should remain intact.

The Duterte administration is planning a host of new measures to support its six-year term, starting with a proposed P3.35 trillion national budget for 2017.

The plan includes the sale of casinos owned by the Philippine Amusement and Gaming Corp. (Pagcor).

Aside from privatizing state-run casinos, the Department of Finance is also proposing to impose a P6-per-liter excise tax on diesel and to increase a similar levy on gasoline to P10 per liter from P4.35.

Furthermore, the Finance department is also recommending that rich senior citizens be stripped of their exemption from the 12 percent value-added tax.