The Philippine Sugar Millers Association (PSMA), in a letter to President Ferdinand “BBM” Marcos Jr., expressed its concern over the recent pronouncements of Finance Secretary Benjamin Diokno to increase the excise tax rate on sugar-using beverages and to adopt an open sugar importation policy.
Pablo Lobregat, PSMA president, in the letter also noted that Diokno is opting to retain the tax rate on beverages using high fructose com syrup or HFCS.
Under the sugar sweetened beverage (SSB) tax provision of the TRAIN Law beverages that use sugar are imposed an excise tax of P6/liter, while those that use HFCS, either entirely or in combination with sugar or other sweeteners, are subject to P12/liter excise tax.
“The proposed increase in SSB tax on sugar will benefit a small segment of beverage manufacturers – composed of multinational corporations – at the expense of Filipino farmers and workers who are saddled with a higher sugar excise tax rate,” he said.
Lobregat told the president the Seventeenth Congress adopted a two tier excise tax system for SSB for well-intentioned reasons.
The higher tax rate for beverages with HFCS discourages their consumption because of health risks attributed to the sweetener, evidenced by the growing number of health-conscious consumers in the United States and Europe preferring beverages sweetened with sugar instead of HFCS, he said.
The lower tax rate on sugar-using beverages encourages the continued use of sugar but likewise ensures government revenue from the SSB regardless of the sweetener that the beverage uses, Lobregat added.
It is important to note that sugar production in the Philippines primarily involves farmers and workers in the provinces, he said.
In contrast, HFCS is entirely imported at significantly cheaper price primarily due to government subsidies to corn production by HFCS exporting nations, Lobregat said.
“This proposal to raise and equalize with HFCS the tax rate on sugary beverages to P12/li signals a significant shift in policy, from giving due regard to the importance of supporting locally produced sugar to promote growth in our agricultural sector and lessen importation, to favoring the use of imported sweetener”, he said.
Increasing the excise tax on sugar-using beverages will only serve to promote the use of HFCS in beverages, but will not benefit the entire local food industry, Lobregat pointed out.
This is because HFCS is used as sweetener primarily and only in beverages, and not in the production of food products, he said.
If government needs additional revenue to fund poverty alleviation programs, the Department of Finance should instead consider intensifying its efforts to ensure compliance with the existing two-tier SSB excise tax structure, Lobregat said.
This is because it has become evident from the recent raids conducted by the Bureau of Internal Revenue on production facilities of beverage manufacturers and of supermarkets/groceries that payment and collection of the SSB tax have not been thoroughly enforced – begging the question what purpose does it serve to raise tax rates if it is not enforced totally, he said.
Lobregat also said raising SSB excise tax will result to higher selling prices of soft drinks which will be passed to consumers, which will add to inflation.
In a recent study on open sugar importation or sugar liberalization commissioned by the National Economic and Development Authority (NEDA) entitled An Assessment of Reform Directions For the Philippine Sugar Industry (2021) which was undertaken by Dr. Cielito Habito, it was determined that although liberalization should be pursued, the case for “sugar trade liberalization appears to be weak at this time”, Lobregat informed the president.
The study instead recommended gradual or phased-in liberalization, he said.
This recommendation is based on the finding that there is only a “modest net gain to overall society from full sugar liberalization of P2B or 1.8 percent”, Lobregat said.
The study also pointed out that higher-income groups tend to gain more than lower-income groups from full liberalization, he said.
The NEDA study concluded that “All told, liberalization would benefit consumers but would favor the rich more than the poor. All this would be at a clear cost to the sugar industry stakeholders”.
Lobregat said “even as liberalization would lead to a net overall welfare gain for society, the gains to be achieved may not be substantial to offset the downsides in terms of adverse distributional impacts and non-economic costs in the social and political realm.
Lobregat said PSMA is at the disposal of the president, if he wants to discuss any issue on our sugar industry.*