The Department of Finance (DOF) is seeking to impose a P10 per liter excise tax on sugar-sweetened beverages as part of the government’s comprehensive tax reform package.
“In the same way that sin taxes were implemented to safeguard public health, the DOF is seeking to impose an excise tax on sugar-sweetened beverages, which would be a uniform rate of P10 per liter regardless of whether it is in liquid or powdered form,” Finance Secretary Carlos Dominguez 3rd said in his keynote speech before the Rotary Club of Manila.
The tax would be imposed on soft drinks, soda pop, energy drinks, and sweetened teas and coffees. This is in line with a bill filed by Representatives Horacio Suansing Jr. and Estrellita Suansing.
The bill seeks to impose an excise tax of P10 on sugar sweetened beverages, which will be increased by 4 percent each year by inserting a new section in the National Internal Revenue Code. “This measure is proposed to provide additional revenue collections for our country,” according to the bill.
The bill noted 50 percent of the collections may be allocated to the General Fund, 20 percent to the Department of Health, 20 percent to the Department of Education, 3 percent to the Department of Interior and Local Government, 3 percent to the Food and Drug Administration, 2 percent to the Food and Nutrition Research Institute, and 2 percent accruing to the Bureau of Internal Revenue.
The proposed tax reform measures will be submitted by the DOF to the Congress for approval.
Dominguez said the slew of tax reforms is the linchpin of a broader reform package envisioned by the government to attack generational poverty, restore peace and order, curb armed insurgencies and transform the Philippines into a high middle-income state by the end of the Duterte presidency.
Tax reform, he said, is crucial to the task of reconfiguring the Philippine economy to attain inclusive growth because the Duterte administration needs to enhance access to opportunities for all, reduce the disparities among regions, and gird up the youth for dynamic economic roles via superior educational and healthcare systems.
Dominguez said the DOF will submit to the Congress its first package of tax reforms that aims to restructure the personal income tax rate, expand the value-added tax (VAT) base, adjust the excise taxes on petroleum and automobiles, and impose a new excise tax on sugar-sweetened beverages as a public health measure.
Reducing the personal income tax rate from 32 percent to 25 percent would be done over a two-year period, benefiting most taxpayers except the “ultra-rich” or individuals earning P5 million or more annually, Dominguez noted.
The reduction aims to align the country’s income tax rate with the rest of Southeast Asia.
To simplify the filing of taxes, the DOF will also reduce income tax brackets, the Cabinet official said.
Dominguez noted wage workers are the ultimate beneficiaries of the proposed simplified tax system and reduced personal income tax rate as a result of higher disposable incomes that will help rev up the economy.
To offset the revenue losses from the lower personal income tax rate, Dominguez said the DOF is proposing an increase in the excise taxes on fossil fuels, which will have a marginal impact on fuel costs as the government expects the current low price regime of petroleum products to continue.
The increased tax on petroleum products would not lead to a regressive tax system, because economic studies have shown that per capita consumption of fuel hew closely to income levels. Individuals who consume these products the most are in the uppermost income tax brackets.
“It is regressive to subsidize petroleum; but it is eminently progressive to tax consumption of the product,” Dominguez said.
“To cushion the impact of the tax adjustment, we will be funding direct subsidies for the vulnerable sectors that will be affected by higher fuel prices,” he added.