THE Department of Finance (DOF) has instructed the Bureau of Internal Revenue (BIR) to closely check the tax payments made by beverage manufacturers in the country, as a discrepancy of P10 billion was reported in the payment of taxes for sugar-sweetened beverages (SSBs) as of end-October 2018.
Finance Undersecretary Karl Kendrick T. Chua said in a recent executive committee (Execom) meeting of the DOF that the BIR has so far collected only around P30 billion in excise taxes from SSBs, as opposed to the programmed target of P40 billion as of October 2018.
Chua said the shortfall may possibly be the result of SSB manufacturers not paying the correct taxes.
“My hunch is that those that are supposed to pay the P12 tax are only paying P6,” Chua said.
Thus, the BIR is tasked by the DOF to determine whether beverage manufacturers are paying the correct amount and type of tax as mandated under the Tax Reform for Acceleration and Inclusion (TRAIN) law, which took effect on January 1, 2018.
Under the TRAIN, a P6-per-liter excise tax is slapped on beverages using caloric and noncaloric sweeteners, and P12 per liter on beverages using high-fructose corn syrup (HFCS). Milk and 3-in-1 coffee mixes are exempted from the SSB tax.
According to Chua, data from the Department of Health and the Food and Drug Administration showed that only one company—Coca-Cola Femsa Philippines Inc.—has secured an FDA approval to convert its sweetener from HFCS to sugar or other caloric or noncaloric sweeteners as of October 2018.
Other companies that have been determined to be using HFCS as beverage sweeteners still have to apply for FDA approval, which is a requirement before they could shift to caloric or noncaloric sweeteners with the lower tax rate of P6 per liter, he noted.
“The FDA approved only the conversion for Coke, and that was just last August. So I think many are paying P6 when they should be paying P12. That is our concern. I suggest that the BIR conduct an audit [on these companies]. They cannot just change the content per the FDA,” he added.
Also during the Execom meeting, BIR Deputy Commissioner Arnel S.D. Guballa reported that the bureau has already started checking the tax payments of beverage manufacturers and been sending deficiency assessments to correct the SSB tax discrepancies.
He pointed out that excise tax collections on SSBs from large taxpayers amounted to P29.74 billion from January to October 2018, while another P184.4 million was collected from other SSB taxpayers, for a total of P29.92 billion.
Broken down, the BIR collected a total of P7.70 billion in SSB excise taxes during the first quarter of 2018, P9.95 billion for the second quarter, P8.64 billion during the third quarter and P3.63 billion as of end-October.
Finance Secretary Carlos G. Dominguez III said the newly imposed SSB tax has significantly contributed to the state coffers despite the shortfall as of October 2018, bringing in an additional P100 million a day in revenues, or about P3 billion a month.
The finance chief added that around P100 million a day was the operational target set by the DOF for the collection of the SSB excise tax.
The TRAIN law or Republic Act 10963 was signed into law by President Duterte in December 2017, slashing personal income-tax rates while implementing offsetting measures such as increasing fuel excise tax rates, as well as imposing an excise tax on SSBs, among others.
Image credits: Nonie Reyes