Excise on sugary drinks could hurt beverage industry — DTI

THE Department of Trade and Industry (DTI) has warned the House of Representatives on the possible negative effect of proposed excise taxes on sugarsweetened drinks, saying it might dampen the growth of the beverage industry.

“Even as the DTI recognizes the proposed measure’s noble objectives to promote a healthy lifestyle and improve tax revenues, the net effect might be negative overall as it would hamper the growth of the beverage industry, affect jobs across the value chain, and also burden the consumers, especially the poor who rely on these for their energy needs,” the department said in its position paper submitted to the House Ways and Means Committee.

House Bill 292, filed by Reps. Horacio P. Suansing, Jr. of Sultan Kudarat’s second district and Estrellita B. Suansing of Nueva Ecija’s first district, seeks to amend Republic Act No. 8424, or the National Internal Revenue Code of the Philippines, to impose a P10 excise tax — which will increase “by 4% every year thereafter effective Jan. 1, 2017” through revenue regulations issued by the secretary of Finance — on “sugar-sweetened beverages per liter of volume capacity.”

The measure, which is pending before the House Ways and Means Committee, aims to curb consumption of sweetened beverages on health grounds as well as to offset revenue to be forgone from a rebalancing of the country’s tax regime.

The DTI said that the proposed taxation would “definitely affect the pricing competitiveness in the retail market of local beverage producers.”

The department added that the proposed tax scheme will negatively impact the sugarcane industry, as the proposed measure not only covers artificial sweeteners but also locally produced sugar.

“[T]he proposed taxation measure may reduce sugar producers’ income upstream through lower purchases by manufacturers due, in turn, to lower demand and sales for the finished product downstream,” the DTI said.

The Trade department also said that the sugar-using industries “are already burdened with regulations to patronize local sugar, which is higher priced.”

“The beverage industry, along with allied industries, will be negatively affected and will lead to lower demand and employment in the industry and distributors. This also negatively affects the retailers and consumers at the bottom end of the value chain,” the DTI concluded.

The Finance department has expressed support for the bill as it plans to include the measure in its proposed health tax package.