Excise tax on sweetened beverages: Sweet beginning or bitter end?



It is our favorite time of the year again — the Yuletide season. ‘Tis the season when we see colorful lights lining the streets, hear different Christmas carols, feel the holiday breeze, and appreciate the company of our loved ones. This is also the season when we all look forward to mouthwatering special dishes, desserts, and of course, a wide variety of drinks and cocktails that greet us at Christmas parties and reunions.

Have you considered, though, that this might be the last year you’ll be enjoying the affordable prices of sweetened drinks?

When President Rodrigo Duterte took office last year, one of the changes his administration promised to pursue is a tax reform program that would establish a simpler, more just, and more effective system of tax collection that would help the poor by taxing the rich more. Included in the proposed tax reform program is the implementation of excise tax on sweetened beverages (SB).

Currently, there are no specific provisions in the Philippine Tax Code that pertain to the excise tax on SBs. What we have are two versions of the proposed tax reform – that of the House of Representatives and the other, of the Senate.

With this, we have to ask, which proposition will be less burdensome on Filipinos?

Let us say Juan Dela Cruz has a budget of P200 for sweetened beverages that fall under category (A), (B) and (C) of the Senate version, with the assumption that these fall under category (B) established by the House of Representatives (all other things remain constant):

The proposed Senate bill (based on the sample analysis made) would lead to an overall increase of up to 8.75 percent in the cost of sweetened beverages, whereas the Lower House bill would lead to a 26.47 percentage increase. Therefore, the current budget of P200 for these sweetened beverages may not be enough should the sugar excise tax proposed by the lower chamber come to pass.

On the positive side, the imposed tax on SBs is akin to Republic Act 10351, or the Sin Tax Reform Law, and addresses the public health issues related to sugar consumption. With the increased price of SBs due to excise tax imposed, the hope is that Filipinos’ intake of products with high sugar content will be lessened, thereby helping them live healthier and reduce their risk of developing diseases related to a high-sugar diet, such as diabetes and hypertension.

On another note, it is also worth emphasizing that consumers of SBs are not the only ones who will be burdened by this reform. Private businesses in the sugar-sweetened beverages (SSBs) industry may also experience a reduction in sales, which may eventually lead to less profit or, worse, to a loss.

Further, both the House bill and the Senate bill are specific about the responsibility of the Food and Drug Administration (FDA). Pursuant to the House bill, the FDA shall require all manufacturers and importers to state on the label that caloric or non-caloric sweetener is added to the sugar-sweetened beverages. Along with this, the FDA shall examine first the SSBs to determine the caloric and non-caloric sweetener content of such as specified on the label before these products are sold in the market. It shall also require all manufacturers and importers of SSBs in powder form to indicate on the label the equivalent of each serving (number of scoops, teaspoons, or tablespoons) per liter of volume capacity. Lastly, the FDA shall also conduct random inspection of the SSBs on display in supermarkets, groceries, or retail stores to check compliance.

The specific responsibility of the FDA under the Senate bill was modified as follows: The FDA shall require all manufacturers and importers of sweetened beverages to indicate on the label the type of sweetener used. In the case of manufacturers and importers of powdered milk, ready-to-drink milk, flavored milk, and fermented milk, the FDA shall require them to state on the label the type and amount of the sweetener added to the sweetened beverage.

A bicameral conference committee will still be called to thresh out the conflicting provisions of the upper and lower chamber’s bills. So this excise tax on sweetened beverages may still be subject to some modifications. Nonetheless, the government will not be placed at a disadvantage since its intended tax reform program will generate much needed tax revenues to finance its projects.

With this in mind, it is still important to enjoy and to celebrate the holidays. After all, Christmas is a season of love and sharing. So have fun, party away, but don’t forget to keep your sugar in check. Happy holidays!

The author is a senior with the Tax & Corporate Services division of Navarro Amper & Co., the local member firm of Deloitte Southeast Asia Ltd. – a member firm of Deloitte Touche Tohmatsu Limited – comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.


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