Sugar and splice

The tax program of this administration had a tough time in Congress, and so in his recent Sona, the motorbiking Duterte Harley threatened Congress to pass it in full and pronto.

Or else… well, the President could always use his shining popularity to hurt any legislator bidding for reelection in 2019, to say the least.

But most of the senators, according to the head of its ways and means committee, Sen. Juan Edgardo Angara, would still go for some “middle ground” in the tax program.

In other words, the Senate would change the tax reform package that was crafted by the economic team of Duterte Harley who wanted it approved in full, and approved fast.

The question now is, will the Senate just follow the mangled version in the House of Representatives, which passed it in no time —albeit a much watered down version.

Angara estimated that the Senate would need a couple of months more to come up with what senators could call a “fair” package.

Nicknamed “Train” by the economic team, what with its impossible name of “Tax Reform for Acceleration and Inclusion,” the program already had the business sector riled up.

In particular, the automotive and the processed food industries launched all-out lobbies to convince the legislators to tone down the tax measures.

But why did senators talk about the “middle ground?”

On the one hand, the administration wanted to raise as much revenue as it could to finance its P8-trillion infrastructure program, through higher taxes on fuel, vehicles and sweetened drinks.

On the other hand, senators believed that the package, as crafted by the economic team, would burden the poor more than the rich—particularly the higher taxes on fuel and sweetened drinks.

For example, the senators wondered why the tax package would impose an additional P10 tax for every liter of sugar-sweetened beverage—uniformly.

Angara at one time noted that most senators would want to splice the tax on sweetened drinks, perhaps even graduated rates based on the amount of sugar content per volume, so that the more sugar, the higher would be the tax rate.

The fear in the Senate was the possible domino effect of the higher taxes on fuel and drinks, hitting not only consumers, but also small retail businesses.

The Philippine Chamber of Food Manufacturers, for instance, found out that the tax rate of P10 per liter would make it the highest rate of its kind in the whole world.

To top it all, based on the same research, such an extremely punitive rate would raise the prices of the items most commonly bought by the poor.

By the way, the Department of Health has been advocating for a punitive tax on sweetened drinks, similar to the “sin tax” on alcohol and tobacco.

Supported by advocacy groups, the DOH wanted the punitive tax to discourage the consumption of too much sugar among Filipinos.

Well, the Department of Education already joined the fray, as Sec. Leonor Briones issued Order No. 13 to ban foods and drinks with “high amounts of saturated fat or sugar or salt” in school canteens.

From what I gathered, the Federation of Philippine Industry already challenged the authority of the education secretary to classify food items, which technically belonged to the FDA, or the Food and Drug Administration under the DTI.

Anyway, the studies commissioned by the food industries also concluded that less than 2 percent of the Filipino diet contained sugar, and the carbohydrates mostly came from rice at 42 percent, even noting that “overweight and obesity” were concentrated in classes A and B.

In fact, almost 30 percent of those aged 5 to 10 years were still underweight, and almost 9 percent were even malnourished.

How could the tax on sweetened drinks ever be, at the same time, a health measure?

But the lobby against the P10 tax on sweetened drinks also delved into its effect on the retail sector called sari-sari stores, some 1.3 million of them, or more than 90 percent of the retail stores.

The lobbyists warned that the punitive tax would force at least half of them to close shop, affecting more than 130,000 jobs.

But most important to the lobbyists would be the effect on the beverage processing sector: some P20 billion drop in yearly sales.

In the end, the drop in sales would also affect the government tax collection, both in the VAT and income tax.

By taking time to study the tax package, Angara and company indeed may be shining on to something here.