American investors frown on sugar tax

American businesses that invest in the Philippines sharpened their criticism on Wednesday of a tax bill moving swiftly through Congress. Specifically, the companies are concerned over a provision in the bill that would add a new tax to sugar sweetened beverages (SSBs).

The SSB tax is couched inside a larger tax overhaul bill called the Tax Reform for Acceleration and Inclusion (TRAIN). Two versions of the bill passed each house of Congress, and the differences are currently being ironed out by members from the House and Senate in a bicameral conference committee.

In a statement, the US-ASEAN Business Council and the Center for Strategic & International Studies said that while U.S. businesses support most of the measures contained within TRAIN, the SSB tax is cause for concern. The groups said that inclusion of the tax overlooks consumers who want lower prices for their food and drinks, as well as the right to consume what they choose.

“If passed, by the bicameral review process this week, the new law would raise prices for Filipinos, restrict choice and result in reduced investment, lost jobs and send a message to investors from around the world that the Philippines is willing to violate global trading rules,” the US-Asean Business Council said.

Despite strong opposition from domestic businesses and international, long-term investors in the Philippines, Congress moved forward with the SSB tax. A spokesman from the US-ASEAN Business Council said, “This new legislation should be carefully reconsidered.”

If the legislation passes as it’s currently drafted, it will most likely hurt the Philippines’ competitiveness during a time when other Asian countries are trying to increase their competitiveness for foreign investment. The SSB tax would likely turn away international investors from the Philippines.

When companies decide where to invest overseas, a number of factors come into play. The tax and fiscal policies of the investment country are very important in the decision making process, experts say.

If the SSB tax is passed, it would also likely draw complaints from the World Trade Organization for unfair trade practices. The Philippines Department of Foreign Affairs even said that the SSB tax structure is discriminatory under the WTO’s rules.

Other nations’ attempts at taxing sugar sweetened drinks have crippled beverage manufacturing industries, cost jobs, made small businesses lose revenue, and have produced a backlash against politicians supporting the tax. One only needs to look at Indonesia, Mexico, and Denmark as examples. Even municipalities that have tried to pass an SSB tax - like Chicago and Philadelphia in the U.S. - have failed.