The Department of Finance (DOF) is looking at allowing the importation of sugar as a “compromise” to producers and sellers to be impacted by the planned rate increase and the elimination of exemptions on the sweetened beverage tax.
The DOF and the Department of Health (DOH) are jointly pursuing a junk food and sweetened beverage tax.
Meanwhile, the Philippine Sugar Millers Association (PSMA) urged the DOF to implement more efficient tax collection policies instead of raising the tax rate starting next year.
The DOF intends to increase the sweetened beverage tax rate under the Tax Reform for Acceleration and Inclusion Law to P12 per liter, regardless of the type of sweetener used.
This tax rate will be indexed annually by four percent, and exemptions will be eliminated to broaden the tax base.
DOF Secretary Benjamin Diokno said the importation by manufacturers is a “reasonable compromise.”
“Expectedly, producers and sellers of sugary products subjected to tax will object as it will raise the selling price of their products to the market. But knowing the big difference between the world price and the domestic price of sugar (a major input in the industry) then allowing the industry to import their own sugar requirement would reduce their cost of production,” Diokno told reporters over the weekend.
“This is the ‘sweetener’ or incentive for producers of sugary products to accept the broader, simpler tax on sugary products,” he added.
Diokno said the DOF’s proposal makes “good economic sense,” as it simplifies the tax system, with one uniform rate better than dual rates.
On the broadening of tax base for sweetened beverage products, Diokno cited as an example a 3-in-1 coffee brand which is currently excluded but has a high sugar content.
“We will make it uniform… administratively, that’s also good to simplify,” Diokno said.
Meanwhile, Diokno said the implementation of sugar liberalization will not require the passage of a law.
“There’s no need, even with just a policy, you will be allowed to import sugar. You don’t need a law,” Diokno said.
Regarding criticisms the eyed junk food tax is anti-poor, Diokno said there will be exemptions to address this concern, with the list to be coordinated with the DOH and the Food and Nutrition Research Institute.
He said instant noodles could be one of those likely to be exempted.
“I think it (exemption list) will come out around the next half of the year, second half of the year,” Diokno said.
Meanwhile, Jesus Barrera, PSMA executive director, said in a statement over the weekend the DOF “should prioritize the enforcement of existing laws to ensure compliance and fairness” instead of focusing on increasing tax rates.
“The latest efforts of the BIR (Bureau of Internal Revenue) to inspect manufacturers and retailers on their payment of the excise tax are commendable. The additional revenue can be realized from the thorough enforcement of the existing tax laws. Furthermore, what purpose does it serve to raise tax rates if there exist individuals or companies that fail to adhere to them,” the group added.
Barrera was referring to a recent raid in a warehouse in Cavite which uncovered that a beverage maker failed to pay P800 million in excise taxes due on the sweetened beverages it manufactures,” Barrera said.
The PSMA also said three supermarkets recently raided by the BIR in Quezon City were found to be distributing untaxed sweetened beverages.
PSMA said increased tax collection efficiency will similarly achieve the government’s health and revenue objectives.
“The significance of an effective tax collection mechanism extends beyond public health concerns. It offers a reliable source of revenue for the government that is directed towards essential public services and reinforces public trust, particularly in the aftermath of the pandemic as the economy recovers,” the group said.
PSMA said the DOF should conduct a comprehensive dialogue with all stakeholders, including sugar millers, sugarcane farmers and industry experts on the planned increase in tax rates.
PSMA is composed of 16 mills which produce 78 percent of the total Philippine sugar production. Angela Celis and Jed Macapagal
