February 25, 2018, 5:53 am
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Tax exemption of 3-in-1 coffee backed

The country’s estimated 34,000 small coffee farmers and the Philippine Association of Agriculturists (PAA) welcome the exclusion of 3-in-1 coffee from the sugar sweetened beverage (SSB) tax in Senate Bill 1592, which has been approved by the Senate Ways and Means Committee and is currently on second reading.

These coffee mixes are purchased mostly by lower income consumers, taken at breakfast to provide a good start to the day among workers, students and others from various walks of life.

“The exclusion of pre-packaged powdered coffee products with or without sugar has ensured that we farmers have a fighting chance to improve our competitiveness, as we can count on manufacturers to continue purchasing our produce,” said coffee farmer and Silang, Cavite Vice Mayor Aidel Paul Belamide in a letter to committee chair Sen.  Sonny Angara.

The exclusion of 3-in-1 coffee will help local green coffee farmers to maintain competitiveness versus coffee imports.

The country’s output of green coffee beans, estimated at 23,000 tons annually, will not be put to a disadvantage compared to those of high-end coffee shops whose products will not be taxed. 

The exclusion provides for a more level playing field, since if 3-in-1 coffee is to be taxed, one  who buys it in a carinderia or sari-sari store will shoulder the tax, while the executive who buys his sweetened coffee from an upscale coffee shop will not pay the tax.

“Although the past two years have been challenging for us farmers because of the unpredictable climate, we have been investing in new techniques to continuously improve yield, and it is a great relief to know that with the support of the Senate, these investments for the betterment of our lives will not be wasted,” Belamide added.

For its part, the PAA, the sole professional organization of agriculturists accredited by the Professional Regulatory Commission (PRC), also expressed its appreciation for the exclusionof 3-in-1 coffee in Senate Bill 1592.

 “We believe that taxing locally grown and manufactured coffee products will negatively impact (on) local agriculture, as all three components of these products (coffee, sugar and creamer) are agricultural products. We are aware that lower income segments of society, including farmers consume a considerable portion of 3-in-1 coffee mixes because of its convenience and affordability.  An increase in the prices of these products would reduce the consumption of locally produced coffee products, which will ultimately result in the reduction in the market for locally grown coffee beans. The targets set under the coffee industry roadmap may never be achieved,” the PAA said in a letter signed by its chair, Roberto  Rañola Jr.

According to a 2016 study of the University of Asia and the Pacific, an SSB tax of P10 per liter of volume as provided for in House Bill 5636, the House version of the legislation, would cause the instant coffee segment losses amounting to 76 percent of volume and 64 percent of value or P23 billion.

The decline would be the highest among the different beverages to be affected. 

The projected decline in the instant coffee segment would be the highestbecause it has the most price elasticity among the beverage segments, according to the study.

 With coffee being the beverage of the masses, particularly those in the CDE socio-economic categories, an increase in price of 48 percent for coffee products caused by the tax would make these products considerably less affordable to the common consumer.
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