Low income households hardest hit by higher tax on sugary beverages

MANILA, Philippines - Food manufacturers have expressed alarm over the potential impact on consumers of government’s move to increase the excise tax on sugar sweetened beverages (SSBs), saying those in the lower income bracket will likely take the hardest blow.

 “Juan Dela Cruz will stomach most of the burden imposed by the SSB tax. The proposed model follows a one-size-fits-all mindset without due consideration for the common Filipino’s household budget for daily diet, including those that are considered pantawid gutom,” the Philippine Chamber of Food Manufacturers Inc. (PCFM) said.

 “The Philippine SSB tax will bring much more punishment to those below the poverty line, consisting of 26.3 percent of the country’s population as of 2015. People below the poverty line may be less able to change consumption patterns due to limited income and required spending for necessities,” the group added.

Citing a research by AC Nielsen in 2016, PCFM said consumption of coffee mixes, powdered concentrates and soft drinks is heavily skewed towards the D and E socio-economic categories or those in the lower income bracket.

These products are expected to be affected the most by the proposed higher SSB tax, it said.

According to the study, 87 percent of coffee mixes are consumed by the class D and E, while those consuming powdered concentrates and soft drinks coming from the lower income bracket account for 86 percent and 79 percent, respectively.

 “Therefore, it is not correct to say that the rich will be the ones affected by the tax. In fact, the very bottom of the income pyramid will end up paying more new taxes and will not even benefit from the personal income tax reduction,” PCFM said.

House Bill 292, which seeks to slap a P10 per liter excise tax of volume capacity on SSBs, is part of the Duterte administration’s first tax reform package.

PCFM said the proposed SSB excise tax is “disproportionately high” compared to those in other countries with similar taxes.

“The Department of Finance considers the Mexican tax model as best practice in sugar taxation. But ironically, the Mexican tax model only impacts on prices of SSBs by a maximum of 10 percent. In contrast, the HB 292 model will increase the prices of the common Filipino’s basic drinks from 35 percent to a high of 111 percent,” the group said.