Sugar planters and millers belonging to the Sugar Alliance of the Philippines (SAP) are seeking a six-year delay in the implementation of the proposed additional P10 per liter excise tax on sugar-sweetened beverages (SSBs)—part of the revenue-offsetting measures of the tax-reform bill—as it could result in lower sugar production.
SAP Spokesman lawyer Emilio Yulo said the additional P10 per liter excise tax could result in two scenarios for the sugar industry: first, lower demand for sugar due to lower sales of SSB products; and second, lower farm-gate price of the commodity due to absorbed costs by beverage companies.
“Assuming there’s a beverage with an existing cost of P30, if it’s passed on that would be P40 [at retail level], then the effect would be there will be lower sales, and lower sales would call for lower demand for sugar. Supposing it is absorbed by the beverage corporation, then the effect would be they will now buy sugar at the farm gate at a lesser price level,” Yulo told reporters in an interview on May 17 in Quezon City.
“This is not part of their corporate social responsibility, so the most viable and logical thing to do is to lower your buying price at the farm gate. Whichever, either of the two scenarios, we will be affected,” Yulo added.
Under the proposed comprehensive tax-reform package of the Department of Finance, SSBs include soft drinks, soda, flavored carbonated or noncarbonated beverages, fruit drinks, sports drinks, sweetened tea, coffee drinks and energy drinks, among others.
Yulo said they are asking for a six-year reprieve for the sugar industry should the proposed additional tax on SSB be passed to prepare producers from the effects of such measure.
“The government should give us a window of six years and by that time the Sida [Sugar Industry Development Act] will be on its eight year. By that time we can now be imposed of excise tax because there’s no more reason for us not to be efficient with the government support, given the accumulated Sida fund,” he said.
“By that time the Sida would be on its eighth year and we should be efficient by that time. If the Sida doesn’t work, then the sugar industry has no more reason to complain because the government has helped the industry for eight years,” he added.
Under the Sida law, which was passed in 2015, the SRA will be given an annual allocation of P2 billion to be spent in developing the local sugar industry.
However, Yulo also said the government should have a clear policy direction for the agriculture sector, particularly for the sugar industry.
“The problem is that there’s no clear-cut agricultural policy. Right now you impose excise tax, then the signal should be clear: does the government want to support the agriculture sector or not?” he said.
“It’s as simple as that—if you want to support the sugar industry for the next 10 years, then impose the taxes after a short period of time to make sure that they are already efficient and they can already absorb the effects [of reforms],” he added.
The SAP also called for the imposition of higher tariffs on imported high-fructose corn syrup (HFCS), a cheaper alternative sweetener, to ease its detrimental effects to the local sugar sector.
“We support the imposition of higher tariffs on HFCS. At present HFCS is slapped with zero tariff, it is only the 12-percent VAT [value-added tax], which the importers are paying. So it is still like zero percent,” Yulo said.
“As high as possible, like in Japan and EU [European Union], where they impose a high tariff on HFCS because they are discouraging the entry of it for health reasons,” Yulo added, when asked on how much tariff on imported HFCS should be put in place.
HFCS being sourced from China are slapped with zero tariff, while those coming from South Korea are levied a duty between 1 percent to 7 percent, according to the Sugar Regulatory Administration (SRA).
Data from the Bureau of Customs showed that the Philippines imported 373,137.994 metric tons (MT) of HFCS last year, which is 50.94 percent higher than the 247,204.570 MT imported in 2015. The total volume of HFCS imported in 2016 was equivalent to 287,316.256 MT volume of raw sugar.
The SRA and sugar industry stakeholders pointed to the massive importation of HFCS by beverage companies as the culprit in the depression of price of local sugar by as much as P500 per 50-kilogram bag.