Is the Proposed Beverage Tax Really Anti-Poor?

MANILA, Philippines - A proposal to impose higher taxes on sugary beverages including carbonated drinks, energy drinks, powdered juice, bottled iced tea, coffee, fruit drinks and other similar fruit products has been included in the tax reform package proposed by the Duterte government.

Once passed into law, House Bill 5636 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act, sugar-sweetened beverages (SSB) will come with a P10-per-liter tax. This will apparently dissuade consumers from purchasing SSBs.

proposed tax on sugary drinks will affect the poor, economy

According to the Philippine Association of Store and Carinderia Owners (PASCO), the imposition of SSB tax will result to 3% to 200% rise in prices.

Powdered Juice or Iced Tea, which are currently priced at P9 per 1L sachet will be sold P30 per 1L sachet after beverage tax. Bottled iced tea’s price will rise to P30 per L from P20 per L.

The 3-in-1 coffee sachet, previously priced at P5, will be sold for P8 per sachet. Carbonated drinks will be sold at P50 per liter from P28 per liter. Meanwhile, ready-to-drink juice will be pegged at P36 per L from P20 per L.

Coffee drinks produced in popular coffee shops like Starbucks and Coffee Bean and Tea leaf will not be taxed since the companies are paying for a 12% VAT. Interestingly, 3-in-1 coffee is also subject to VAT.

new consumer prices ssb tax

A bittersweet move hitting the poor?

In order to offset the revenue loss of the government from lower income tax, the SSB tax was among the set of excise taxes being proposed. A revenue of P47 billion from the collection of SSB tax was estimated by the Department of Finance.

But will putting excise tax on SSB result to a sweet ending?

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Many critics believe the imposition of tax on SSB will particularly hurt low income earners, sari-sari store and carinderia owners, as well as sugar farmers in the Philippines.

Based on a study carried out by AC Nielsen Retail Survey, 80% of SSB consumers actually come from class CDE, which is the poorest segment. Low income earners don’t really benefit from lowering of income tax rates because they are exempted from paying income taxes.

Aside from negatively affecting common Filipino consumers, the substantial price increases on SSB are expected to hit about 1.3 million sari-sari store owners who get 40% of their sales from beverages.

Sugar farmers, who get 50% of their local sugar production sales from the Beverage Industry Association of the Philippines (BIAP), will also likely suffer the blow of SSB tax.

A big blow to the economy?

Carried out by the University of Asia and the Pacific, a 2016 economic impact study on the proposed P10 SSB tax revealed that it will cause reduced government revenues, job losses and economic contraction.

economic impact SSB tax

According to the study, excise on SSB tax will result to P20 billion decline in sales of SSBs and P51 billion decrease in revenue of related industries.

The study also claimed that it will result to loss of 133,750 direct and indirect jobs and 1.5% increase in unemployment rate. It also concluded that it will cause P30 billion revenue loss from VAT and Corporate Income tax and P63 billion total economy loss.

Considering all of these possible effects, the SSB tax will not support the objectives of the first package of TRAIN.

If you think the SSB tax will not support the goals of the Philippine government, voice out and sign this online petition.

-- Mini, The Summit Express


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