Domestic manufacturers have asked the Philippine Competition Commission (PCC) to look into the possible effects of the proposed sugary drinks tax on the industry’s competition landscape, particularly citing the Senate version that divides sweetened beverages into different tax brackets.
The Senate version of the Tax Reform for Acceleration and Inclusion (TRAIN) bill, aside from lowering the House-proposed tax rate on sugar-sweetened beverages (SSBs), aims to put differentiated tax rates on sugary drinks, depending on the type of sweetener used.
According to Jesus L. Arranza, chairman of the Federation of Philippine Industries (FPI), having a two-tier or multitier tax system would create market segmentation.
“Since you’re not taxing all beverages but only those consumed by the poor, it has the effect of a ‘two-tier’ system; that will affect the market share of companies catering to the poor and those to the rich. One group will have an advantage over the other. Is that not going against the anticompetition act?” Arranza said in a news briefing on Tuesday.
In the House of Representatives’ version, an excise tax of P10 is proposed to be levied on SSBs on per-liter volume capacity. The Senate version, on the other hand, proposes a P10-per-liter volume capacity on SSBs using purely high-fructose corn syrup, P5 per liter on drinks using purely caloric sweeteners and P3 on beverages using mostly
Two years after implementation, beverages using purely caloric sweeteners will be taxed at a rate of P0.05 per gram of sugar. The two other categories will stay the same.
According to Arranza, citing Nielsen data, the highest consumers of juices, soft drinks and powdered juice are from the D class. This means that the tax measure is anti-poor.
Eighty-four percent of the retail landscape is also comprised of sari-sari stores, which are the primary purveyors of these prepackaged sweetened drinks.
The FPI, a group of domestic manufacturers, said the implementation of the tax measure will cause a 40-percent to 60-percent sales slump among sari-sari stores, brought about by the 25 percent to 50-percent price increase of daily commodities.
The group is also concerned about the TRAIN’s effect on competition. Arranza cited the case of coffee retail chains, whose products will not be covered by the SSB tax, as their beverages are not prepackaged or do not contain manufacturer-added sweeteners. He said there should be a uniform implementation of taxes. “Market segmentation should be caused by free-market forces not by law.”
“I think it’s about time for the PCC to speak out on the issue and come out with its opinion,” Arranza noted. The Department of Finance highlighted in recent interviews that the proposed tax on SSBs is more of a health measure than a revenue-raising bill.
Finance Undersecretary Karl Kendrick T. Chua reasoned that SSBs are mostly empty calories that have little or no nutritional value, but are relatively affordable and easily accessible, especially to children and the poor, which is why Filipinos consume more of these products.
Moreover, the finance official said that as SSBs are nonessential food items and a nongood, the excise tax is not regressive. By taxing the entire spectrum of people’s consumption of nonessential goods, consumption of healthier and essential items would increase.
But Arranza said the government should also look into the food intake of all Filipinos, as it could be barking up the wrong tree by singling out SSBs as the cause of the rising cases of obesity. For instances, he said Filipinos consume too much white rice, which causes blood-sugar levels to rise rapidly.