Tax on sugar-sweetened beverages hits the poor

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Last week, as chairman of the Federation of Philippine Industries (FPI), I was invited to attend the Senate Committee on Ways and Means hearing on the proposed excise tax on sugar sweetened beverages (SSB). Headed by its Committee Chairman Senator Sonny Angara, I found the invitation very timely and a great opportunity to push our advocacy for equal opportunities in business and trade, as provided for in Article IV of the Philippine Constitution or the Equal Protection Clause, which guarantees that “No State shall deny to any person within its jurisdiction the equal protection of the law.”

And while I was in high spirit when I came to the Senate for the hearing, knowing that we would be able to push for the equal protection of the law on FPI member organizations and companies that would be affected by the proposed tax on SSB, I was, however, disappointed, frustrated and a bit embarrassed, after the Honorable Senator Angara stopped me, politely though, from reacting to the lengthy position paper read by former Health Secretary Teresita Cabral on the excise tax on SSB, where about 80% of what she read was about the cigarette tax.

The hearing, after all, was about the proposed excise tax on SSB. Although, I was surprised why Cabral was given all the time to read and discuss their position on the excise tax on cigarette, while I was stopped from clarifying some issues pointed out by Cabral on the cigarette tax even only for a few minutes of the committee time. According to Senator Angara, he gave Cabral the chance as that was her first time to attend a Senate Ways and Means Committee hearing. But like Cabral, it was also my first time to attend a Senate Ways and Means Committee hearing.

Being an advocate for the unitary tax on cigarette, I was disturbed by Cabral’s lengthy discussion on the cigarette excise tax and thought it would be a mortal sin on my part if I would not be able to clarify some issues pointed out by Cabral on the health impact of the excise tax on cigarette, among others. Had I been given even only a few minutes by the committee chairman to speak, I could have enlightened those present in the hearing on some of the counter-productive effects of the two-tier tax on cigarette, like the proliferation of fake tax stamps, market segmentation, and the creation of a virtual cartel.

But nevertheless, while I felt that I was deprived of my right to be heard, I humbly submitted to the decision of the Honorable Senator and apologized for my brief deviation from the issue and proceeded to discuss our position on the excise tax on sugar sweetened beverages.

The poor will take the brunt on the excise tax on sugar-sweetened beverages

Since under the proposed excise tax on SSB, it’s only the three-in-one coffee, other sweetened drinks in sachet and soft drinks, among other similar sweetened drinks that would be taxed, it is practically taxing only the poor. The impact of the excise tax on sweetened beverages would be most felt by the poor as the three-in-one coffee and other similar drinks in sachet are among the cheapest and most convenient forms of food/drinks by poor Filipinos.

And yet the coffee and other sweetened drinks sold at world-famous coffee shops like Starbucks, Seattle’s Best, UCC and Figaro, among others, are not taxed. These shops are where the rich and moneyed people go for their coffee or tea. Like the coffee enjoyed from a three-in-one sachet and the coffee served at world famous coffee shops, they’re both food and/or beverage. Why then should a three-in-one coffee be taxed and the coffee served at swanky and world-famous coffee shops tax free?

How did the experts from the Department of Health (DOH) rationalize that the three-in-one coffee and soft drinks will keep the Filipinos, especially the poor, unhealthy, thus deprive them of their cheap and affordable beverage/food by taxing them, while the rich who frequent swanky coffee shops can drink their brewed coffee mixed with sugar to their hearts delight tax free, presumably without any health risk. I still believe that anything taken in excess of moderation can be a health risk.

Excise tax on sweetened beverages will create market segmentation

Like what happened to the two-tier tax on cigarette, taxing sweetened beverages like the three-in-one coffee and soft drinks, among others, while other coffee products, cakes and pastries are not, will create market segmentation. Remember that market segmentation is a derivative of free competition, and imposing a tax law that will create market segmentation through preferential taxation will be a violation of the Philippine Competition Law.

Remember also that on a household level, many poor Filipino families lace their cooked rice with sugar for their viand or just to add flavor to the cooked rice. Let me ask the experts at DOH then: Will taxing sugar sweetened beverages solve the country’s problem on diabetes and obesity?

Obesity and diabetes, after all, are lifestyle generated and/or genetically acquired health issues.

Perhaps, the Department of Health should consider an even more rational program to address the country’s obesity and sugar related health problems like diabetes through a more intensified consumer education campaign, without necessarily putting more burden on the lives of the poor by taxing the food and beverages they find most affordable.

But if the excise tax on sugar sweetened beverages is a tax measure to generate more revenues for the government, why then are the rich and moneyed who take their coffee at swanky and world-famous cafes not taxed for their coffee, cakes and pastries, while the poor who satisfy their hunger with the cheaper sweetened coffee in sachet and soft drinks are being taxed? The P10 per liter excise tax that would be imposed on SSB would raise the price of three-in-one coffee and soft drinks by more than 50%.

And if the purpose of the excise tax on sugar sweetened beverages is to create a healthy citizenry, our legislators and DOH experts must take into account that, to have a healthy Filipino citizenry, we must first have a healthy industry and economy, an economy that would provide enough jobs for its people and more healthy foods on the table.

While I left the Senate with a heavy heart after the Angara interruption, I had a sense of fulfillment though, knowing that I may have enlightened the committee members and those present during the hearing, the fears that the excise tax will erode the competitiveness of the local beverage industry, even as it will also affect the lives of poor Filipino consumers. And by the way, if the excise tax on SSB is based on volume and not on the sugar content, would it not be taxing water?

 

 



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