DoF studying two-tier tax on sugary drinks

THE Department of Finance (DoF) is still open to a two-tier sugar-sweetened drinks tax as a means of minimizing consumption of the drinks, despite its earlier opposition.

Finance Secretary Carlos G. Dominguez III told reporters late last week that the department’s tax reform team is still reviewing the viability of a two-tier excise tax scheme for sugar-sweetened beverages to effectively reduce demand.

“You know there are pluses and minuses to the [ taxation based on] sugar content. There is a case in England were they have two rates, if the drink has X amount of sugar, the tax is so much, if it has lower amount of sugar the tax is less. And according to the results a lot of people have actually reduced the amount of sugar [they consume in beverages],” he said.

“That might work but I don’t know, we have to discuss the matter with the implementing agencies, if in fact they can monitor that,” added Mr. Dominguez.

The proposed scheme, contained in the approved House Bill 5636, or the first package of the tax reform program, slaps a P10 excise tax per liter of sugar-sweetened beverage. It is intended as a health measure to discourage consumption of beverages deemed unhealthy.

In the first year of implementation, the tax is expected to bring in an additional P47 billion in revenue, to be earmarked for health programs and sugar farmers affected by the measure

Senators met with Mr. Dominguez and other DoF officials last week to discuss the comprehensive tax reform program — as they are currently debating on their version of the bill — and some of them were very particular on the P10 sugar-sweetened beverage tax.

“The main problem in taxing sugary drinks is this: in the case of tobacco, all consumption of tobacco is bad for you, in the case of sugar not all consumption of sugar is bad for you. A moderate amount of sugar consumption is actually necessary. So you know are you taxing that moderate amount or are you taxing a higher amount,” Mr. Dominguez said.

The DoF earlier said during a Senate hearing that the two-tiered proposal may not be viable as it is “very difficult” to administer, and may be discriminatory under World Trade Organization rules.

Assistant Secretary Ma. Teresa S. Habitan told reporters earlier that there is also a question whether beverages that are sweetened using substances like high fructose corn syrup and other sweeteners are included in the excise tax regime.

The tax reform program or the Tax Reform for Acceleration and Inclusion is certified as urgent by President Rodrigo R. Duterte.

The Finance department said it will seek to persuade the Senate to pass the department’s version of the bill after the House’s version cut projected net revenue from the first package by some P23.4 billion to P133.8 billion in the first year of implementation.

The Senate version, Senate Bill No. 1408, is projected to yield P169.1 billion in the first year. —