Doing it the easy way

Sari-sari store and carinderia owners are up in arms over Congress’ plan to impose an excise tax on sugar sweetened beverages or SSBs.

As proposed, an excise tax of P10 per liter shall be levied on carbonated drinks, energy drinks, sweetened tea and coffee, fruit drinks, carbonated drinks such as softdrinks and other similar products under House Bill 5636 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act. The rate will be increased by four percent every year.

According to the Philippine Association of Stores and Carinderia Owners (PASCO), the proposed tax is anti-poor, unfair and oppressive. The group has gathered more than 300,000 signatures since July to protest the said imposition.

PASCO said the signature campaign aims to convince the government to scrap the sweet tax, which it emphasized will double or triple the prices of sweetened beverages that are bought mostly by low-income consumers, thereby affecting the livelihood of about 1.3 million sari-sari stores owners who source 30 percent to 40 percent of their sales from instant coffee, juice and softdrinks.

In its petition, the group of low-income patrons and owners of small sari-sari stores and carinderias from all over the country claimed that the proposed sweet tax would substantially increase their daily expenses and reduce their take-home pay, a situation that goes against the Duterte administration’s tax policy which is supposed to alleviate the poor of tax burden and shift the responsibility to the wealthy individuals.

PASCO, in an open letter to President Duterte, said that while it throws its support behind the administration’s poverty alleviation and tax reform programs, the tax on SSBs goes against the President’s intention.

Observers note that while the tax reform package aims to reduce income tax on minimum wage earners, such windfall would be offset by the drastic increase in prices of beverages, and thus goes against the logic of progressive taxation.

While the government claims that the sweet tax is a health measure in the first place, the Department of Finance’s estimate that it would generate P40 billion to P47 billion in additional revenues from the implementation of the sweet tax means it is a tax measure in the guise of a pro-health bill.

It was earlier reported that there is nothing healthy in making the cost of non-alcoholic beverage products beyond the reach of ordinary Filipinos and that data from the 2017 State of Food Security and Nutrition in the World by the Food and Agriculture Organization has shown that undernutrition is a more serious concern in the Philippines than obesity.

The prevalence of undernutrition among Filipino children is estimated at 13.8 percent, exceeding the prevalence of overweight children at five percent and the prevalence of obesity among adults at 5.2 percent, they added.

PASCO noted that while it understands and supports government’s need to raise money for its various social and infrastructure programs to help improve the lives of the Filipino people and sustain the country’s economic growth, this bill is anti-poor and will make small micro-retailers, consumers, sugar and coffee farmers, and manufacturing plant workers carry the burden.

It describes the sweet tax as anti-poor, simply because 80 percent of the consumers of affected products such as sweetened juice drinks, tea and coffee; all carbonated beverage with added sugar; flavored water; energy drinks; sports drinks; powdered drinks not classified as milk, juice, tea and coffee; cereal and grain beverages; and other non-alcoholic beverages that contain sugar are low-income earners.

Ordinary Filipinos consume these beverages on a daily basis and these products provide them with energy to go through their work, studies and livelihood activities, the group emphasized.

The tax is also anticipated to have a domino effect on other industries such as agriculture and manufacturing. A lower demand for raw sugar due to decreased production of consumer goods would likely affect the livelihood of sugar farmers as well as employees of food and beverage companies.

Earlier, Sen. Sonny Angara, who chairs the Senate Ways and Means Committee, was quoted as saying he is now considering “a fairer and more reasonable” excise tax on SSBs.

The House version slapped tax rates ranging from an additional P10 per liter of SSB containing locally produced sugar and up to P20 per liter for imported sweeteners. Angara said a P10 tax per liter was too high, as this could increase prices by as much as 50 percent. He proposed an alternative which is an excise tax rate that depends on the drink’s sugar content.

Sen. JV Ejercito is likewise proposing a tax that focuses on the sugar content in drinks, and not on the total volume of beverages.

In particular, Ejercito proposes a tax of three centavos per gram of sugar on sweetened beverages using purely caloric sweeteners and exemption for beverages that use purely coconut sap sugar; a tax of five centavos per gram of sugar on sweetened beverages using purely high fructose corn syrup or in combination with any caloric or non-caloric sweetener; and a tax of one centavo per gram of sugar on sweetened beverages using purely non-caloric sweeteners or a mix of caloric and non-caloric sweeteners and exemption for beverages using purely steviol glycosides.

The tax on SSBs to my mind shows lack of imagination and worse, political will on the part of our legislators and the national government. If they really want to raise more public funds, all they have to do is stop smuggling and tax leakage. A study by the University of Asia and the Pacific has revealed that illicit traders in only eight industries were able to smuggle at least P904.6 billion worth of goods into the country in a span of five years. The P47-billion targeted collection from taxing SSBs is only five percent of that amount. And to think that it covers only eight industries.

Understandably, our government wants to do it the easy way, which is definitely not pro-poor.

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