When sugar’s not sweet

The imminent tax on sugared drinks such as soft drinks, energy drinks and powdered drinks, is reason for sari-sari store owners and CDE classes to worry. And beverage manufacturers, sugar planters and sugar plantation laborers as well.

A sari-sari store owner said at a Bulong Pulungan session that majority of her customers are expected to stop buying their favorite Tang fruit powder drinks. While a sachet of the powdered drink now costs P10, presumably in January next year, it will cost P13. That is, once the law imposing an excise tax of P3 on powdered sugar beverages goes into effect.

The sachet contains 25 grams of sugar (16 grams of which are sugar and flavors), and once mixed with 75 grams of water, make five glasses or one liter of juice. In effect, the consumer will pay P13 for 25 grams of sugar and five glasses of water. The sari-sari store owner, Vicky Aguinaldo of Paranaque asks, “Why do we have to pay for five glasses of water?”

Indeed, why can’t we just pay for the sugar content? The P3 added to an P11 sachet is big money for wage earners who can hardly make both ends meet. This will mean reduced income for sari-sari store owners run mostly by housewives forced to help augment their husbands’ meager earnings.

Vicky is president of the Association of Sari-sari Stores and Carinderias which counts 6,000 members. Most of the stores are hole in the wall affairs selling an assortment of goods ranging from chichirias to cigarettes, match sticks, salt and vinegar and canned goods, but 40 percent of their sales is derived from soda (Coke, Pepsi, Tru Orange, Sprite, some energy drinks) and powdered drinks in sachets.

The powdered drinks in sachets are a blessing to the CDE classes (with some from the B class for sure) because they are “stretched” to quench the thirst of family members (mostly with four to five children), the kids’ baon and construction workers.

The Sugar Sweetened Beverage (SSB) excise tax was proposed in the House since last year and is now under extrapolation in the Senate. Former Congressman Romulo Roman, who is currently president of the Beverage Industry Association of the Philippines, expressed at Bulong Pulungan his hope that the legislators study the ramifications of the proposal and lower the tax rates to benefit consumers and small entrepreneurs.

Cherry Pinga-Ramos, Mondelez Philippines Inc. external affairs manager, said the giant conglomerate is supportive of the Department of Finance’s Tax Reform for Acceleration and Inclusion (TRAIN), which aims to raise revenue to finance the government’s high priority development projects. But Mondelez and Romulo hope not only for lower taxation but also for a “level playing field” in the powdered beverage (BB) segment, by for example enjoying the exemption privilege granted the 3-in-1 coffee mixes.

Mondelez markets several globally iconic snack brands such as Tang powdered beverages (which has 16 flavors), Eden cheese, Toblerone, Tiger Energy, Dairy Milk, Oreo biscuits and Halls candy.

As Cherry said, Tang beverages are fortified with vitamins that help address the micronutrient deficiency of Filipinos. One serving of Tang provides 100 percent of the Recommended Dietary Allowance (RDA) for vitamin C requirement for children and is a good source of Vitamin A, B2 (riboflavin), B3 (niacin), B6 iron and folic acid. Cherry said since 2012, Tang has reduced its sugar content in the Philippines by 127 percent, making each serving only 20 calories.

Furthermore, Mondelez maintains that the proposed volumetric tax system, or taxation by liter, does not work particularly for the powdered beverage segment because 85 percent to 90 percent of the volume to be taxed is the zero-calorie water that is added to the powdered concentrate to make a one-liter drink.

We’ve touched only the higher cost of sugar sweetened powdered drinks. But an excise tax will also be imposed on soft drinks and carbonated drinks, sweetened milk, tea and coffee, and sports drinks and energy drinks.

Authors of the original House Bill 292 are (1st District, Nueva Ecija) Rep. Estrellita Suansing and (1st District Sultan Kudarat) Rep. Horacio P. Suansing Jr. Rep. Estrellita Suansing was quoted as saying the bill is “more of a health measure,” and intended to dissuade consumption of sugar.

According to Jesus Barrera, deputy director of the Philippines Sugar Millers Association Inc., it was established during the public hearings of the committee on ways and means of the House of Representatives and the Senate, that there is no local study that shows a correlation or causality between beverage consumption among Filipinos and increase in obesity, diabetes and other non-communicable diseases attributed to sugar. What is apparent, according to a study of the University of Asia and the Pacific on Sugar and Sweetener Consumption in the Philippines is that sugar consumption has been declining in recent years.

The final excise tax will be known hopefully soon. A source of anxiety is that the tax could be higher than what consumers and sugar millers can afford. A serious point of contention is whether beverages using local refined sugar on one hand and imported high fructose corn syrup on the other hand should be taxed the same rate.

Why should sugar be taxed with a lower rate? Barrera says, “The sugar industry is one of the major employment and revenue generators in the Philippine countryside and in the agricultural sector. The industry provides direct employment to 700,000 Filipinos, of which 50,000 are small farmers and agrarian reform beneficiaries and nearly 650,000 farm and mill/refinery workers spread across 20 sugarcane farming provinces across the country.”

“The sugarcane farming and sugar production already make significant contributions to the revenue stream of government,” Barrera continues. “The industry had a P42.4 billion total gross value of farm production in 2015, plus a ‘multiplier effect’ in cities and municipalities where sugar mills/refineries are located. For example, in Bukidnon, the operations of the two mills generate about P1 billion in economic activity a month during the milling season. In addition, the sugar industry paid P7 billion in direct and indirect taxes in 2015 alone, plus P105 billion annual value added from sugar’s various products and support industries.”

“A high excise tax will reduce sugar demand, which will then affect incomes of farmers, who are mostly poor.”

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