Excise tax on sweetened drinks feared to adversely affect GDP growth

Food manufacturers have warned of a 0.5-percent contraction in the gross domestic product (GDP) and the loss of jobs if the plan to slap a P10 per liter excise tax on sugar-sweetened drinks is approved in Congress as part of the Duterte administration’s first tax reform package.

Citing a University of Asia and the Pacific study titled “An Economic Impact Study of the Sugar-Sweetened Beverage bill on the Beverage Industry in the Philippines” published last year, the Philippine Chamber of Food Manufacturers Inc. said that if House Bill No. 292 authored by Nueva Ecija Rep. Estrellita Suansing would be approved, “the beverage industry is forecasted to lose almost 44 percent of its volume because of the tax.”

“This is due to the fact that the P10 per liter tax will increase exorbitantly retail prices of the more popular beverage products from 30 percent to more than 100 percent. The projected volume loss of such magnitude is alarmingly high and if realized, will cripple the beverage industry, cause it to dramatically downsize which in turn will cause negative ripple effects across the economy,” the chamber claimed.

“The punitive effect of this tax will not only affect businesses but will also drive down household incomes of those related to the industry and people will even lose jobs,” it added.

The chamber said the excise tax on sugar-sweetened beverages “will cost the economy a net loss of more than P60 billion,” as the estimated P38.74 billion in revenue gain would be offset by P101.55 billion in losses from declines in both industry sales and production.

“This loss is forecasted to reduce the country’s GDP at 2015 levels by as much as 0.54 percent. The tax will have a strong negative ripple effect across industries,” according to the chamber. —BEN O. DE VERA