DoF wary drinks firms may game sugar tax

A SUGAR CONTENT-based approach for the proposed drinks tax will allow beverage manufacturers to game the system and avoid paying a higher levy, ultimately weakening the proposal’s health objectives, off icials said.

Department of Finance (DoF) Undersecretary Karl Kendrick T. Chua said that the multi-tiered approach will only incentivize beverage manufacturers to adjust their sugar content to below the taxable threshold, but will not deter the public from consuming unhealthy drinks.

“The small Coke you can buy below seven grams ( of sugar content), but if you drink four of them, there’s no overall effect. The threshold will not work,” he told reporters on the sidelines of the Economic Journalists Association of the Philippines Economic Forum on Friday.

The Senate ways and means committee proposed in a hearing that all beverages containing seven grams of sugar and below will pay a much lower tax, while those above it will pay more, but not exceeding P5.

Mr. Chua also said that the tiered scheme will be diff icult to administer.

The sugar-sweetened beverage tax proposal in House Bill No. 5636, or the Tax Reform for Acceleration for Inclusion (TRAIN) Act, slaps a P10 per liter excise tax on sugary drinks regardless of sugar content.

The DoF estimates additional revenue of P47 billion in the first year of implementation. Proceeds will fund the Health department’s anti- obesity programs, and support sugar farmers affected by the measure.

Mr. Chua also said that the Senate’s proposal to cap the excise tax at P5 would not be enough to change consumer behavior.

“Some would ask why we would object when it is lower than P5, when it is not primarily a revenue measure. But that is not the point. The point is there is a health objective,” Mr. Chua said.

“The health objective is that the price should [increase] by 20% to have the optimal impact, so 20% is P10 per liter,” he said.

However, he said a minimum 10% increase in beverage prices may have an effect on consumption.

Other measures of the tax reform program include the reduction of personal income tax rates, harmonizing estate and donor taxes, withdrawing some value-added tax exemptions, and raising excise taxes on petroleum and automobiles. —