Final tax increase bill raises taxes on sweetened beverages

Despite strong opposition from consumers and business, Congress raised taxes on sweetened beverages in the major tax increase bill now headed to President Duterte’s desk for his signature.

After at least three sessions of negotiations, the Senate and House of Representatives ratified the TRAIN tax bill on Wednesday. The bill will now be sent to President Rodrigo Duterte for signing into law. Once signed, the new tax increases are set to begin on January 1, 2018.

The sweetened beverage tax increase

Known as the “SSB Tax”, the tax targets sweetened drinks. During negotiations, the bicameral conference committee agreed to a higher tax on sugar-sweetened drinks with P6 per liter for drinks with either sugar or artificial sweeteners, and P12 per liter on drinks using high fructose corn syrup (a popular sugar alternative).

Although the real purpose of the SSB Tax is to raise revenue for the government, it was framed as a way to improve public health. The inclusion of drinks with artificial sweeteners was puzzling because artificial sweeteners do not cause obesity, tooth decay or other health problems.

Tax exemptions for milk and instant coffee were retained in the final tax increase bill.

In the Senate, the SSB tax, which favors the local sugar industry, won by a vote of 8-7 with Senate President Aquilino Pimentel III rendering the deciding vote.

Senator Juan Miguel Zubiri said during a press conference that while the sugar industry won the fight against high fructose corn syrup (HFCS) on the TRAIN bill, the fight is not over and that the next fight would be at the World Trade Organization, referring to possible trade violations in the tax bill. Zubiri called for Filipinos to be prepared with international trade lawyers.

A joint statement made by the US-ASEAN Business Council and the Center for Strategic and International Studies last week that warned the proposed sugar sweetened beverage tax would violate global trading rules and asked the government to reconsider the legislation.

An opinion column published by the Manila Standard criticized the possible consequences of the SSB tax. Experts have agreed that the SSB Tax will hit low-income Filipinos the hardest.

Political payback

Presidents of the United Sugar Producers Federation of the Philippines and the National Federation of Sugarcane Planters agreed that in the next election the sugar industry will campaign for the reelection of the senators who voted for a higher tax on HFCS.

Manuel Lamata, president of the United Sugar Producers Federation of the Philippines said that those senators who did not vote in favor of the sugar industry “should be exposed.”

Enrique Rojas, president of the National Federation of Sugarcane Planters, said, speaking of senators supporting the sugar industry during the vote: “We will never forget them, during election time, they can always count on the sugar industry, that they will have our full support.”

Other tax increases

While the bill mostly increased a number of taxes on Filipinos, it exempts from taxation the first P250,000 in annual income in order to increase people’s take-home pay.

The bill increases taxes on fuels. Diesel fuel will be taxed at P2.50 per liter in 2018, P4.50 in 2019, and P6 in 2020.

Gasoline taxes will more than double in the next four years. Gas taxes will increase from the current tax of P4.35 per liter to P7 in 2018, P9 in 2019, and P10 in 2020.

The bill also increases taxes on tobacco, coal, and cosmetic surgery.