February 25, 2018, 7:30 am
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US biz says sugar tax should be reconsidered

The tax on sugar sweetened beverage (SSB) could send the signal to international investors and will hurt Philippine competitiveness at a time when other countries in Asean are stepping up their competitiveness for foreign direct investment,” American businesses said in Southeast Asia said.

In a statement, the US-Asean Business Council and the Center for Strategic & International Studies, said while American businesses support most of the provisions of the  Tax Reform for Acceleration and Inclusion (TRAIN) , this part of the measure overlooked the consumers, who want lower prices for their foods and drinks and the right to choose what they consume.

“If passed, by the bicameral review process this week, the new law would raise prices for Filipinos, restrict choice and result in reduced investment, lost jobs and send a message to investors from around the world that the Philippines is willing to violate global trading rules,” the council said.

US businesses lament the fact that despite opposition coming from domestic associations and international players who are long-term investors in the Philippines, Congress moved forward with the SSB tax.

 “This new legislation should be carefully reconsidered,” the group said 

The House of Representatives and the Senate are currently reconciling their respective versions of the bill and are aiming to submit the final version to President Duterte before they recess on December 16.

“If Congress passes this bill, with the  unequal provisions on the sugar-sweetened beverages (SSB) intact, it won’t be Christmas for the consumers or to companies considering investments in the Philippines,” the Council said. 

The SSB provisions call for a doubled tax rate on sweeteners that are produced largely outside the Philippines but play a critical role in meeting Filipino demand for high quality and affordable food and beverage products. 

“If passed as drafted, the legislation will hurt Philippine competitiveness at a time when other countries in Asean are stepping up their competitiveness for foreign direct investment,” the group added.

The US businesses said companies base investment decisions on a range of factors—and stability and pragmatism of tax and fiscal policies are very important. Thus, this discriminatory SSB tax provision sends the wrong message at exactly the wrong moment. If passed, the law will draw complaints in the World Trade Organization (WTO) and have a substantial chilling effect on foreign direct investment (FDI).  Even the Philippines Department of Foreign Affairs has warned that the two-tier SSB tax structure is discriminatory under WTO rules. These consequences would undermine the Duterte administration’s 10-point socio-economic plan and directly contradict initiatives to improve the investment climate by easing restrictions on foreign investment, reducing red tape, and increasing spending on infrastructure.
 
 There are also unintended economic consequences that could arise from this tax. Attempts at taxing SSBs in countries like Indonesia, Mexico, Denmark, and in cities like Chicago, Philadelphia, among other areas, have resulted in crippled beverage manufacturing industries, significant job losses, loss of revenue for small businesses, backlash against politicians in favor of such taxes, and lower than targeted tax revenues. 
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