THE DEPARTMENT of Finance (DoF) said it will pursue an audit of the beverage industry after missing collection targets for Sugar-Sweetened Beverages (SSBs) in 2018, to validate whether users of highly-taxed corn syrup did indeed switch to sugar as claimed.
In a report on revenue performance under the Tax Reform for Acceleration and Inclusion (TRAIN) Act, the DoF said producers of SSBs have claimed that they stopped using High-Fructose Corn Syrup (HFCS) entirely since Jan. 1, 2018, with the effect that they paid the lower excise tax on sugar-sweetened products of 6% rather than the 12% prescribed for HFCS-sweetened products.
One way to verify whether such a shift to sugar took place, the DoF said in its report, is to check whether producers filed the necessary paperwork to reformulate their products to use sugar, the DoF said, adding that the Bureau of Internal Revenue (BIR) is currently auditing producers in cooperation with the Food and Drug Administration (FDA), with which reformulation applications must be filed before firms can legally market products after a switch in ingredients.
The DoF estimated the shortfall in SSB excise at P11.9 billion.
An even bigger drag on performance, the DoF said, was value-added tax (VAT), where the shortfall was P31.5 billion. It quoted the Bureau of Customs (BoC) as saying that only eight industries and government entities were the source of VATable imports. It identified the marginal sources of VAT as the power transmission and jewelry industries, as well as government entities like the Philippine Sports Commission, the Armed Forces of the Philippines, the People’s Television Network, the University of the Philippines, the National Museum, and the Bangko Sentral ng Pilipinas.
It said the main source of incremental VAT revenue was interest liabilities of the Philippine Deposit Insurance Corp.
It added than when “second-round consumption effects” are considered — the increased consumption caused by higher disposable income as a result of TRAIN — the DoF recouped more VAT from stores and restaurants, such that the VAT shortfall is effectively only P11.6 billion.
It said overall performance of VAT reflected the decline in marginal TRAIN-related items, missing targets by P68 billion in 2018.
Overall, the DoF said TRAIN-related revenue in 2018 beat the target by 8.1% at P68.4 billion, with the BIR beating its TRAIN target by P10.6 billion and the BoC missing the goal by P5.5 billion.
It said post-TRAIN income tax collections fell by less than expected — P111.7 billion, against the projected P146.6 billion, due to greater compliance, an increase in registered taxpayers and the creation of more jobs.
Also beating the targets were the auto excise tax, beating the goal by about P6.2 billion, tobacco excise, by P5.6 billion, and documentary stamp tax by P4.7 billion.
“Overall, TRAIN revenue exceeded its targets, providing additional public resources for infrastructure and human capital development programs. We expect the performance to be sustained in the coming years,” the DoF said.