Excise tax take on sugary drinks misses target

MANILA, Philippines — Excise tax collections on sugar-sweetened beverages (SSB) fell short of target in the first 10 months of 2018, which the Department of Finance (DOF) blamed on possible discrepancies in the tax payment of beverage firms.

In a report to Finance Secretary Carlos Dominguez, Finance Undersecretary Karl Kendrick Chua said excise tax collections on sugar-sweetened beverages amounted to nearly P30 billion as of October 2018, lower than the P40 billion target.

Of the amount, the bulk or P29.74 billion came from large companies, while P184.4 million was collected from other SSB taxpayers.

The DOF said P7.70 billion was collected in the first quarter, P9.95 billion in the second quarter, P8.64 billion in the third quarter, and P3.63 billion in October.

According to Chua, there was a P10 billion shortfall in the excise tax collections possibly because SSB manufacturers might not be paying the correct taxes.

“My hunch is that those that are supposed to pay the P12 tax are only paying P6,” Chua said during a recent DOF Executive Committee meeting.

Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, beverages using caloric and non-caloric sweeteners should be charged an excise tax of P6 per liter, while those using high-fructose corn syrup (HFCS) should be levied a tax of P12 per liter. Milk and three-in-one coffee mixes are exempted from this tax.

Citing data from the Department of Health (DOH) and the Food and Drug Administration (FDA), Chua reported that only one company, Coca-Cola, has secured  FDA’s approval to convert its sweetener from HFCS to sugar or other caloric or non-caloric sweeteners.

He said other companies that have been determined to be using HFCS have not applied for FDA approval, which is a requirement before they could shift to caloric or non-caloric sweeteners.

“The FDA approved only the conversion for Coke, and that was just last August. So I think many are paying P6 when they should be paying P12. That is our concern,” Chua said.

To verify this, Chua suggested for the Bureau of Internal Revenue (BIR) to conduct an audit on beverage companies.

“I suggest that the BIR conduct an audit (on these companies). They cannot just change the content per the FDA,” he said.

Internal Revenue deputy commissioner Arnel Guballa, in response, said the bureau has started checking the tax payments of beverage manufacturers and sending deficiency assessments to correct the SSB tax discrepancies.

Despite the shortfall, Finance Secretary Carlos Dominguez noted that the SSB tax has significantly contributed to state coffers, bringing in an additional P100 million a day in revenue or about P3 billion a month. He said this was the operational target set by the DOF for the collection of the SSB tax.