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DTI: Soft-drink levy must be based on sugar content

THE Department of Trade and Industry (DTI), realizing the full menacing impact of an excise tax on sugar on per-liter basis, has instead backed a proposed shift in the tax base by recognizing the levy as a fraction of overall product content.

This surfaced in an interview with DTI chief Ramon M. Lopez, who saw merit in the sugar producers’ call to change the tax base of the excise tax proposed for sugar-sweetened beverages. 

Lopez said the government supports the industry proposal to impose a tax based on sugar content instead of on a per-liter basis. 

“There will still be an excise tax on it, of course, but instead of the P10 per liter, which they say will have the substantial impact on prices, the industry proposed to index it on the sugar content, in effect taxing the usage. We support that,” Lopez said.

House Bill 5636, also known as the Tax Reform for Acceleration and Inclusion (TRAIN), the first of four reform packages eyed by the Department of Finance (DOF), passed muster at the House of Representatives earlier this week. 

Salient features include a scaled- back personal income-tax rate for fixed-income earners. To offset the foregone revenues, so-called compensating revenue-generating measures were crafted to include an excise tax of P10 per liter volume capacity on sugar-sweetened
beverages (SSB).

SSBs, according to HB 5636, encompass all nonalcoholic beverages that contain caloric sweeteners, added sugar, or artificial/noncaloric sweetener (whether in liquid, syrup, concentrate, or solid form) that is added to water or other liquids to make a drink.

The influential Philippine Chamber of Food Manufacturers, in an earlier statement, said the per-liter excise rate was “disproportionately high” compared to other tax jurisdictions with similar tax schedules.  The group emphasized that the lower income segment, considered the largest consumer of coffee mixes, powdered concentrates and soft drinks, would be hit hardest by the proposal.

The DF earlier projected gaining more or less P47 billion in revenues from an specific imposition, a good portion of which reportedly earmarked for a “health promotion fund”.

Such other industries as the automotive sector and the business- process outsourcing (BPO) industry prospectively levied higher tax rates and stripped of their exemption from the value-added tax (VAT) should be able to cope on their own, according to Lopez.

“As for the BPOs, they’ll be refunded anyway. The DOF committed to a particular time for the VAT refund,” the government official said. As currently crafted, HB 5636 was seen pushing the price of SSBs higher by as little as 2 percent to as high as 140 percent were these goods imposed an excise of P10 per liter.

It has also been calculated the popular brand of soft drinks were to cost as much as 36 percent more if the per-liter proposal excise tax were to muster the houses of Congress.

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