The state-run tax think tank is supporting the government’s proposal to slap an excise tax on sugary drinks to not only shore up revenues but also to serve as a health measure.
“The imposition of an excise tax on sugar-sweetened beverages is deemed timely and justifiable on the ground that these beverages are addicting for some and have been substituted for drinking water. Certainly, the habit of excessive consumption of these products causes adverse health effects,” the National Tax Research Center (NTRC) said in a report titled “Proposed Excise Tax on Sugar-Sweetened Beverages in the Philippines.”
“Given a strong public support, together with substantial health benefits and additional revenue that could be expected from the tax, it is a highly supported policy option of the government. Simply put, a tax on sugary drinks is an essential element of a comprehensive approach to address poor diets and obesity as well as to fund health-related programs of the government,” the NTRC added.
Under House Bill (HB) No. 5636 or the first package of the Tax Reform for Acceleration and Inclusion (Train) approved by the House of Representatives in May, an excise tax of P10 a liter will be slapped on drinks that contain locally produced sugar while a higher P20 will be taxed on those using imported sugar.
At present, sugary drinks are subjected to value-added tax (VAT) based on the gross selling value, while in the case of imported beverages, the Bureau of Customs uses the VAT base in determining the import duties and other taxes to be imposed.
“Under the present tax system, the excise tax, if any, forms part of the tax base when computing for the VAT. Therefore, the proposed excise tax will also mean an increase in the tax base for the VAT. The VAT, being an indirect tax, is generally passed on to the consumers. The proposed excise tax, if pushed through, would also likely be shifted and become part of the price of sugar-sweetened beverages,” the NTRC said.
As such, “the proposed excise tax will make sugar-sweetened beverages more expensive, thus reducing consumption and encouraging the consumers to shift their purchases to healthier options,” the NTRC noted.
Citing local and international studies, the NTRC said soft drinks consumption had been linked to the “development of diseases as Type 2 diabetes, pancreatic cancer, high blood pressure (hypertension), stroke, gout and heart disease.”
Locally, “morbidity trends show that hypertension, heart diseases and diabetes are the leading causes of deaths,” the NTRC said, citing that the Department of Health earlier identified the consumption of soft drinks and carbonated drinks as one of the behavioral risk factors contributing to the development of noncommunicable diseases like diabetes and hypertension.
The NTRC, however, does not support the two-tier excise tax structure to be implemented under HB 5636 and is pushing for only P10 a liter for all products. —BEN O. DE VERA