DOF backs higher tax on soft drinks

MANILA, Philippines–The Department of Finance (DOF) is backing moves in Congress to slap an additional tax on soft drinks in a bid to shore up revenue collection.

“We are supportive of this congressional initiative. We are prepared to join the technical working group tasked to write a substitute bill to fine-tune the proposal,” Finance Undersecretary Jeremias N. Paul Jr. said last Friday.

The Lower House has started to tackle House Bill (HB) No. 3365, authored by Rep. Estrellita B. Suansing of Nueva Ecija, which proposes to slap a 10-percent ad valorem tax on soft drinks and other carbonated drinks sold in bottle and other tight containers. Soft drinks are already subject to value-added tax (VAT).

Imposing an additional tax on soft drinks is expected to add to the government’s coffers about P5 billion in revenues yearly, while also curbing consumption of the sugar-rich drink being blamed as a cause of health problems such as diabetes and obesity.

Suansing has also proposed that the revenues from soft drink tax be poured into a “rehabilitation fund” to be distributed to calamity-stricken areas.

For her part, Commissioner Kim S. Jacinto-Henares of the Bureau of Internal Revenue (BIR) said that while the proposal emanated from Congress and not from the executive, her agency was supporting it.

Henares said that based on the DOF’s computation, soft drink taxes would add about P14 billion to revenue collection.

The BIR chief said that the proposed House measure, however, could not compensate for the bigger potential revenue losses worth about P30 billion annually once the proposed higher cap on tax-exempt bonuses get passed into law. Both houses of Congress are currently working toward raising to P82,000 from P30,000 the tax exemption on 13th-month pay and other bonuses starting next year.

Companies engaged in soft drinks production are opposing HB 3365, citing a University of Asia and the Pacific research released in 2008 that showed such measure would slash sales revenues by a minimum of 16 percent as well as gross income by about 30 percent.

Soft drink firms belonging to the Beverage Industry Association of the Philippines had also claimed that less sales for them as a result of additional taxes would likely bring about job cuts amid slower production.