Need to be competitive

President Duterte has just certified as urgent the tax reform bill in order to ensure the timely and full passage of the tax reform package before Congress ends its session on June 2.

The bill provides for, among others, a higher excise tax on sugar-sweetened beverages. As proposed, sugar-sweetened drinks will be slapped a P10 a liter excise tax in the first year of implementation. In the succeeding years, the tax rates will be increased by four percent annually.

According to the DOF, an additional P47 billion could be generated from taxes on sugar-sweetened beverages, whether in liquid or powdered form.

Finance Secretary Carlos Dominguez earlier said this would serve not only as a revenue but also as a health measure similar to the implementation of the “sin” tax reform aimed at safeguarding public health.

But according to Steven Cua, president of the Philippine Amalgamated Supermarkets Association (PAGASA), the new tax would have a grave impact on the sugared beverage industry and its manufacturers, with the cost being passed on to the poor consumers as higher retail prices.

And because the price of sugar bought in the Philippines is still high compared to other imported sugar and sugar substitutes, manufacturers of sugar-sweetened beverages may be left with no choice but to look for cheaper imported sweeteners.

Beginning 2015, the Philippine tariff on raw and refined sugar imported originating from ASEAN member countries was reduced to five percent. It is, however, in the so-called sensitive list just like in Thailand, unlike other goods where intra-ASEAN tariff rate is now down to zero.

The Philippine sugar industry insists that the protection is needed given the inherent disadvantages that the local sector faces, such as the agrarian reform program that has caused banks to refuse to accept agricultural lands as collateral for loans, the subsidies which other foreign government give to their sugar industry, among others.

Observers say the excise tax is meant to force sugar manufacturers to shape up, to modernize, to produce other sugar-based products like ethanol, and to reduce costs and prices in order to be able to compete with sugar substitutes like high fructose corn syrup (HFCS) and other sugars produced in the region.

The other message is that beverage manufacturers should start using alternative sweeteners in order for their products to remain affordable.

The problem is, sugar producers want higher tariffs on imported HFCS and other sweetener, blaming imports by beverage companies and food producers for the continued drop in sugar prices in the country.

At present, HFCS coming from China is tariff-free while those coming from South Korea are slapped a tariff rate ranging from one percent up to seven percent.

From 50,000 metric tons in 2010, HFCS imports are said to have risen to 370,000 tons last year.

Sugar industry leaders have also opposed the planned excise tax on sugar-sweetened beverages, with some proposing at least a five to six-year exemption from this or at leased a staggered implementation.

For its part, the Export Development Council (EDC) of the Philippines said that imposing an excise tax on a single product alone is regressive and unfair, especially considering that the beverage industry is one of the key export sectors cited in the Philippine Export Development Plan (PEDP) 2015-2017.

The EDC noted that the bill being rushed by Congress would hamper the growth of the beverage industry, the local sugar industry, and fruit farming as well, due to the expected decline in demand for fruit juices and sugar.

Agriculture Secretary Manny Piñol has warned that the sugar industry needs to modernize and produce sugar at competitive prices with the ASEAN market integration, otherwise “we will have problems.”

Too much gov’t is bad

Is the Philippine Competition Commission (PCC) superior to the Department of Information and Communications Technology (DICT) and the National Telecommunications Commission (NTC)?

By law it isn’t. But by the way it is acting lately, it seems to want to assert its superiority over the two other agencies in charge of the telecommunications industry.

In fact, the PCC has questioned before the Supreme Court the ruling of the Court of Appeals’ (CA) blocking the commission’s review of the PLDT-Globe acquisition of San Miguel Corp.’s telecom assets. No less than the NTC has said that the deal is good for the industry.

PCC chair Arsenio Balisacan has said they would not back down or be intimidated by companies who have grown accustomed to unregulated business practices that hamper competition that ultimately hurt the consumers.

Is the PCC, in effect, saying NTC and DICT have not been doing their jobs? After all, only the NTC and DICT are by law the mandated regulators and policy-setting agencies for the telco and ICT sectors.

PCC, let’s face it, does not have the administrative and technical expertise to decide on matters such as what is good for the telecommunications industry. It insists that the sale of the SMC telco assets, which include the much-sought-after 700 megahertz radio frequencies, will kill competition in the telco sector. But would it rather than these frequencies remain unused when they could be put to better use by PLDT and Globe?

In fact, after the NTC allowed the co-use by PLDT and Globe of the frequencies, the two companies immediately announced plans to invest billions of pesos in improving their services in compliance with President Duterte’s directive for telcos to shape up.

The NTC approved in May 2016, the co-use by PLDT and Globe of the frequencies held by SMC, with NTC deputy commissioner Edgardo Cabarrios citing the deal and the co-use of frequencies as a “clear benefit to the public.”

Akamai, an international content delivery network services provider, has cited the impact of the utilization of new frequencies to which PLDT Inc. and Globe Telecom Inc. gained access after their purchase of San Miguel Corp.’s telecom business.

Following its use of the acquired frequencies, Smart Communications reported improvements in terms of mobile internet speed averaging at 13.9 megabits per second (mbps) – better than Australia and Japan which recorded 12.8 mbps and 11.6 mbps respectively.

Globe, meantime, said “it has achieved its target Long-Term Evolution (LTE) network rollout using the 700MHz in 500 cell sites within 2016, mostly deployed in Metro Manila and other highly populated areas.”

Observers cannot understand the PCC’s refusal to recognize the deal, which under its implementing rules prevailing at the time of the sale, was exempt from PCC review. There are those who even suspect the PCC wants the frequencies to go to someone else.

Others meanwhile complain why the PCC has been over-eager in its bid to stop the PLDT-Globe-SMC deal, while being lackluster in its actions with regard to complaints of anti-competitive behavior against cement manufacturers.

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