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US group warns 'sugar sweetened beverages' tax to send wrong signal

MANILA, Philippines — A US business group and a think tank have warned of the negative implications of the proposed taxes on sugar sweetened beverages (SSB) on international investors looking at the Philippines as their next investment stop.

In a joint statement, US-ASEAN Business Council president and CEO Alexander Feldman and Center for Strategic and International Studies trustee Ernest Bower said passing the SSB tax under the Tax Reform for Acceleration and Inclusion (TRAIN) Act would pull the country down in its competitiveness ratings as well as send the wrong message that governance in the Philippines has slipped backwards.

“While American business supports most parts of the TRAIN bill which was passed by the Senate and House, there is one particular part of the bill which could send the wrong signal to international investors and long-term friends of the Philippines,” Feldman and Bower said.

“Specifically, the sections of the TRAIN bill that seemingly overlooked the consumers, who want lower prices for their foods and drinks and the right to choose what they consume. If passed by the bicameral review process this week, the new law would raise prices for Filipinos, restrict choice and result in reduced investment, lost jobs and send a message to investors from around the world that the Philippines is willing to violate global trading rules. The Congress moved forward despite opposition coming from domestic associations and international players who are long-term investors in the Philippines,” they added.

They said, companies prefer to invest in the Philippines due to the country’s “incredible people and their skills, commitment to hard work, and team orientation.”

Feldman and Bower, however, said companies also base their investment decisions on a range of important factors such as stability and pragmatism of tax and fiscal policies.

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“If Congress passes this bill, with the unequal provisions on the sugar-sweetened beverages intact, it won’t be Christmas for the consumers or to companies considering investments in the Philippines,” they said.

“This discriminatory SSB tax provision sends the wrong message at exactly the wrong moment. If passed, the law will draw complaints in the World Trade Organization (WTO) and have a substantial chilling effect on foreign direct investment. Even the Philippines Department of Foreign Affairs has warned that the two-tier SSB tax structure is discriminatory under WTO rules. These consequences would undermine the Duterte administration’s 10-point socio-economic plan and directly contradict initiatives to improve the investment climate by easing restrictions on foreign investment, reducing red tape, and increasing spending on infrastructure,” they added.

Feldman and Bower said the SSB provisions call for a doubled tax rate on sweeteners that are produced largely outside the Philippines but play a critical role in meeting Filipino demand for high quality and affordable food and beverage products.

If passed as drafted, they pointed out that the legislation would hurt Philippine competitiveness at a time when other countries in ASEAN are stepping up their competitiveness for foreign direct investment.

“There are also unintended economic consequences that could arise from this tax. Attempts at taxing SSBs in countries like Indonesia, Mexico, Denmark, and in cities like Chicago, Philadelphia, among other areas, have resulted in crippled beverage manufacturing industries, significant job losses, loss of revenue for small businesses, backlash against politicians in favor of such taxes, and lower than targeted tax revenues,” they said.

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