THE intention is good but the means need improvements. At least that’s what stakeholders are saying
about the proposed reforms in the country’s tax system.
A month or so before the Duterte administration’s banner tax reform bill is expected to be
signed into law, opposition against what its critics had described as some anti-poor provisions
continues to mount.
The latest and most significant is the 300,000 or so signatures gathered by the Philippine
Association of Stores and Carinderia Owners or PASCO calling on government to scrap the so-called
“sweet tax” to be levelled on sugar-sweetened beverages (SSB), including soft drinks and powdered
The petitioners -- low-income patrons and owners of small sari-sari stores and carinderias
from all over the country -- signified their disapproval of a bill that they said would drastically
affect their daily expenses and income. In an open letter, Pasco said it supports the Duterte
administration’s poverty alleviation, but the “sweet tax” is off the mark.
“We understand and support our government’s need to raise money for its various social and
infrastructure programs to help improve the lives of the Filipino people and sustain the country’s
economic growth, [but] this bill is anti-poor and will make small micro-retailers, consumers, sugar
and coffee farmers, and manufacturing plant workers carry the burden,” they said.
Pasco reminded government that 80 percent of the consumers of affected products are low-income
earners, which also constitute up to 40 percent of their income. These are drinks, in other words,
that ordinary Filipinos consume on a daily basis.
The signatures were gathered on the ground through regional sorties. This groundswell of
support may well foreshadow a substantial political backlash because of the sheer amount of affected
people and the anticipated domino effect it might create across other industries.
For instance, a lower demand for raw sugar due to slowed down production of consumer goods
might have an effect on sugar farmers and employees of food and beverage manufacturers estimated at
more than a million Filipinos nationwide.
The disapproval appears to be reaching the corridors of the Senate. Sen. Sonny Angara, who
chairs the Senate Ways and Means Committee, which is deliberating the measure, had said he is
considering “a fairer and more reasonable” excise tax on SSB, something that will nevertheless help
achieve the avowed goal of curbing incidence of diabetes and obesity.
By being more reasonable, Angara may be referring to anything less than the severe rate that
ranges from an additional P10 per liter for SSB containing locally produced sugar and up to P20 per liter for the rest. Angara said an alternative might be imposing excise tax depending on the drink’s
sugar content. The P10, he said, is too high and would predictably jack up prices by as high as 50
Critics said the promised windfall from the tax reform package -- which intends to reduce
income tax for minimum wage earners -- might be completely diminished by the drastic increase in
prices of such commodities, effectively undermining the logic of progressive taxation. The estimated
P40 to P47 billion in additional revenues also put to question the claim from government that the
sweet tax is in fact a health measure.
The real solution might lie elsewhere. A recent multi-industry study by the University of Asia
and the Pacific found that illicit traders in only eight industries were able to smuggle at least
P904.6 billion worth of goods into the country in a span of five years. If we are to include figures
outside the frequently smuggled products like petroleum, cigarettes, and sugar, we might be looking at
a trillion-peso worth of smuggled goods.
The economic impact of illicit trade on the country’s Gross Domestic Product in the same
period is estimated at about P495.5 billion, not to mention the more than a trillion-peso loss in
domestic production or gross output and some 291,070 displaced workers. This represents more than
tenfold what the government coffers stand to gain with its slew of proposed taxes that stand to harm
more than benefit the ordinary Filipino consumer.
In his proposed scheme, Sen. JV Ejercito seems to have gained a holistic appreciation of all
such complex issues.
His proposals include: (1) A tax of three centavos (P0.03) per gram of sugar on sweetened
beverages using purely caloric sweeteners and exemption for beverages that use purely coconut sap
sugar; (2) A tax of five centavos (P0.05) per gram of sugar on sweetened beverages using purely high
fructose corn syrup or in combination with any caloric or non-caloric sweetener; and (3) A tax of one
centavos (P0.01) per gram of sugar on sweetened beverages using purely non-caloric sweeteners or a mix
of caloric and non-caloric sweeteners and exemption for beverages using purely steviol glycosides.
This seems less taxing to the ordinary consumer and promises not to cripple industries that
rely on sugar. Broadly, it also understands the social justice agenda that essentially brought
President Rodrigo Duterte to Malacañang, which promised radical change for the common man, not laws
that are insensitive to his plight.
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