Part One
SOME call it a train to a land of progress.
Indeed, even government officials banner the domino effect of positive changes on the lives of Filipinos of the Tax Reform for Acceleration and Inclusion (Train) bill, which includes the proposed excise tax on sugar-sweetened beverages (SSBs).
For some, however, whatever course the Train bill would take, imposing tax on SSBs is a bittersweet pill for industry.
So Jesus L. Arranza argues.
According to Arranza, chairman of the Federation of Philippine Industries (FPI), the ripple effects the proposed SSB taxation would create is contrary to what the government intends to achieve: a pro-rich and anti-poor measure.
Reduced demand
INDUSTRY stakeholders estimate a TRAIN law would lead to higher prices in products with a wide consumer base.
Once the proposed additional tax is applied, a 3-in-1 coffee sachet, currently priced at P5, will be P8; a 1-liter bottle of juice concentrate, currently priced at P9, will have a retail price of P30; a 1 liter bottle of tea, currently priced at P20, will be sold at P30; and carbonated drinks and tetra-pack of ready-to-drink juice, currently being sold for P15 per liter, will cost P25.
The products covered by the TRAIN, or House Bill 5636, will include all sweetened juice drinks, sweetened tea, sweetened coffee, all carbonated beverages with sugar, including those with caloric and noncaloric sweeteners, flavored water, energy drinks, sports drinks, powdered drinks not classified as milk, juice, tea and coffee, cereal and grain beverages and even nonalcoholic beverages with sugar.
Arranza says these price hikes would drag down the demand for the affected commodities that are usually bought by the masses, particularly those in the lower classes of the society. The upward adjustment in prices, he noted, could result in great reduction in the income of sari-sari store owners, who are the usual sellers of these commodities.
“As far as the additional tax is concerned, aside from poorer economic class, its ripple effect is that many people directly and indirectly making income from all these drinks will suffer,” Arranza told the BusinessMirror.
Repercussions
ARRANZA argues that the TRAIN discriminates against the poor, as its provisions have exempted commodities, which also utilize sugar but could only be afforded by the middle class and upper-middle class of the society.
“The question is, will this tax be applied to all products with sweetener? Are they taxing cakes, pastries? Are they taxing the coffee drinks that only the rich could afford? No,” he said.
“They exempted these commodities. And if there are sectors who will be taxed and those who will be not, then it is not pro-poor but pro-rich,” he added.
Furthermore, this class dis-crimination, Arranza notes, could create a market segmentation that could be detrimental to the growth of the Philippine economy.
“Is that not favoring a market? If you come up with a law not uniformly applied [and could] only be classified as class legislation in violation of the competition law that has been recently passed, then I think it’s not good.” he said.
Arranza cited the Philippine constitution to emphasize his argument. “Remember there is a provision in our constitution stating equal protection of law. Is this equal? You tax 3-in-1 [beverages], you tax smaller stores, but exempt the establishments where rich people frequently go,” Arranza said.“So, this is a pro-rich and anti-poor tax legislation. And that’s our sentiment.”
Ripple effect
THE FPI chairman said the government, particularly the lawmakers, should review the provisions of the TRAIN, especially those pertaining to taxation of SSBs, to come up with a fairer and equitable legislation.
“Bear in mind, when the tax is so high, what will be the consequence to our market? There will be reduction in volume of demand of commodities,” Arranza added. “Reduced demand would have a ripple effect across the value chain. What will happen to producers of sachet? What will happen to the coffee plants? What will happen to our sugar farmers?”
Sugar planters and millers belonging to the Sugar Alliance of the Philippines (SAP) said the additional P10 per liter excise tax could result in two scenarios for the sugar industry.
First, they see a lower demand for sugar due to lower sales of SSB products. Second, there would be a 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,”SAP Spokesman Emilio Yulo told reporters in an earlier interview.
“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.
Lifeline
FOR members of the Philippine Association of Stores and Carinderia Owners (Pasco) the proposed tax measure would be a burden for their members. Pasco officials believe the tax on SSBs would cause them to lose more than half of what they earn daily.
“What would be taxed would be products that form the lifeline of microretailers,” Pasco President Victoria Aguinaldo told the BusinessMirror.
According to Aguinaldo, whose group boasts of some 6,000 sari-sari store owners nationwide,
the increase in the prices of these products would lead to fewer
buyers and, hence, lower sales, lower earnings and inability to
buy products for sale at the
microretailer level.
Beyond ‘sari-sari’
BASED on government data, there are currently 1.3 million sari-sari stores nationwide. It is estimated that 91 percent of all retail stores in the country are sari-sari stores.
Aguinaldo is urging the government to thoroughly review the tax measure, as her group believes it may not achieve the economic reforms and improvements it hopes to bring to the lives of Filipino people.
“Ang pagkakaalam ko po, P47 billion ang madadagdag sa buwis dahil sa tax sa SSBs, at siguro nga po ganoon kalaki,” she said. “Kaso, saan po kukunin iyong P47 billion kung hindi kami makatinda dahil sa kamahalan ng aming tinitinda?”
[As far as I know, the government would be able to raise P47 billion from the tax on SSBs. However, where would they get that amount if we can’t sell anything because prices have increased?]Aguinaldo added the impact of a tax on SSBs go beyond microretailers.If we cannot order from our supplier naturally,
suppliers would cut down on the volume and, maybe, the number of their workers.
Closures
PUNDITS fear at least half of the current number of sari-sari stores nationwide will eventually close shop because running one will no longer serve as a viable source of additional income for a household.
The closures directly or indirectly translate to around 133,750 jobs lost, leading to an increase of 1.5 percent in the unemployment rate. The closures may also lead to a P20-billion decline in beverage sales, around a P2.4-billion loss in value-added tax, a P7-billion loss from affected industries and more than P130-billion investment losses for the Beverage Industry Association of the Philippines.
The House of the Representatives has passed the TRAIN bill, which included the imposition of an excise tax equivalent P10 for every liter for beverages sweetened with local sugar and P20 for those with HFCS or
imported sugar.
The Train bill is now under scrutiny of the Senate Committee on Ways and Means, which is chaired by Sen. Juan Edgardo M. Angara.
To be continued
Image credits: Nonie Reyes