Sweet controversy

The proposed tax reform package is still reeling from setbacks from different sectors  and it looks like rough sailing indeed for the pending bill, both in its original form and the revised version from Senate President Aquilino Pimentel III.

Some of the major issues are the high excise tax on fuel and the proposed tax on sweetened drinks, which will result in prohibitive prices for consumers, and both have been labelled as anti-poor.

Finance Secretary Sonny Dominguez’ position is unenviable. He is saddled with the responsibility of raising government revenues in order to finance the government projects already in the pipeline, the biggest of which is the Build Build Build program of the Duterte administration. And where else will he source the funds if not from added taxes?  Grants and loans, of course, are the only other options and lately, the current administration, through the Dept. of Finance, has been working hard at securing official development assistance (ODA) from foreign governments.

We have secured good deals mostly from the Chinese and Japanese governments. With so many infrastructure projects laid out for implementation, it is in fact these two countries that stand to benefit from our infrastructure push. 

According to BMI Research, “we are seeing evidence that Chinese and Japanese companies are becoming the top beneficiaries of the greater investment and project opportunities available in the country. Imports of infrastructure-related goods from China and Japan have surged over the past year, and we expect this trend to continue to manifest with the number of project opportunities remaining significant.”

I agree with BMI Research that, under the current administration, we are seeing a shift from public-private partnership deals to ODA.  Some of the assistance loans from Japan, according to Sec. Dominguez, have such incredibly low interest rates that they can even be viewed as grants rather than loans. This, of course, is a win-win situation for the Philippines. A potential problem, though, is if we set our eyes myopically on these two governments alone, we may end up limiting our options to the exclusion of other potential players, domestic or foreign.  That would not be such a healthy scenario.

If I may go back to the proposed tax on sugar-laden beverages, B&L had an occasion to talk with Jesus Arranza, chairman of the Federation of Philippine Industries (FPI), easily the biggest organization of manufacturers in the country with 34 industry association members and 132 corporate members. Mr. Arranza shared his thoughts on the controversial issue.

As a backgrounder, Education Sec. Leonor Briones issued DepEd Order No. 13 that limits the sale of certain foods and beverages with high sugar, fat and salt content in public elementary and high schools. She included all the DepEd offices in the country in the ban.

The FPI, through its long-time chair Jess Arranza, petitioned the DepEd, and I quote him: “The issue is not to lift the ban, but it is not within the mandate of their charter…. Nowhere can you find there that the DepEd is authorized to classify foods…..the authority is solely with the Food and Drug Administration.”  The FPI chair added that the secretary of education has overstepped its authority when it classified foods (under the green, red and yellow labels, much like the Bureau of Customs lanes). Under the classification, foods and beverages were classified thus:

1- Those that can be sold in school canteens.

2- Those that can be allowed to be sold on certain days only.

3- Those that will not be allowed to be sold in the school canteens and DepEd offices.

Because the government agency tasked with the duty of regulating food and beverages in the country is the Food and Drugs Administration, Arranza said. “What I can see is a usurpation of function…If there is a usurpation, it is null and void from the very beginning because they have no authority.”

 The FPI took exception to the selective targets of the “sugar tax”, saying that big stores selling cakes and pastries, manufacturers of confectionaries and candies, and big foreign brands of coffee chains have been spared.  The biggest culprit identified with obesity, as espoused by the Dept. of Health and which I am not likely to dispute, is sugar.

Jess Arranza, did not dispute this either, but he is quick to remind the public that even government authorities may err in their pronouncements. He cited the time when the then head of the Philippine Heart Center published a book claiming coconut oil can spike the cholesterol in one’s body and as a saturated fat, it can cause blocks in the arteries that may lead to heart attacks. 

Arranza, who was then head of the United Coconut Association of the Philippines, undertook a separate study, commissioning two US doctors from a hospital at the Harvard University.  To cut to the chase, the study concluded that coconut oil, even as a saturated fat, “belongs to the medium chain triglycerides which, when taken into the body, is right away burned into energy and will not be stored in the body cells.”  Actually, these separate views from equally eminent resource persons continue to this day. The old issue still rages:  Is coconut oil good or bad for your health?  During Arranza’s time, he traced the negative publicity of the coconut industry to the US Soya Association. This time around, it comes from the American Heart Association, and our own Philippine Coconut Authority has vehemently disputed it with studies and pronouncements from our home grown scientists and experts.

An interesting feedback we got from Mr. Arranza is that Finance Secretary Dominguez overtly told Senator Sonny Angara that the provision on taxing sweetened drinks could be up for negotiation IF the excise tax on fuel is left alone.

It’s been two weeks since Mr. Arranza has written Education Secretary Leonor Briones about DepEd Order No. 13. He is willing to give the lady secretary reasonable time to come up with a reply to his petition.  In the meantime, the feisty FPI head is not discounting the possibility of bringing up the issue all the way to court, if warranted.

Mabuhay!!!  Be proud to be a Filipino.

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