House panel approves health funding from sugar tax

Posted on May 11, 2017

PROVISIONS relating to the allocation of revenue from a proposed tax on sugar-sweetened beverages hurdled a House committee yesterday, marking further progress through the legislative mill of the government’s tax reform program.

House Bill 292 features a P10 excise tax per liter on sugar-sweetened beverages.
The tax on sugary drinks was added last week to the first package of the tax reform program.

The overall tax reform bill will be referred back to the ways and means committee, which will conduct a hearing next week before it issues a committee report. The bill then hits the House plenary -- about five months after the committee filed it as a bill in early January.

The House committee on appropriations voted to approve yesterday the allocation of 85% of the projected P47 billion additional revenue generated by the sugary-drinks tax to a health promotion fund.

The remaining 15% meanwhile will be allocated to programs benefiting sugar farmers who may be affected by any dampening of demand for their product.

This means that about P40 billion of the expected revenue will be left to the Budget department for allocation to priority health programs, and around P7 billion could go towards supporting sugar farmers whose incomes may decline when the sugar tax takes effect.

The Tax Reform for Acceleration and Inclusion (TRAIN) program adopted last week House Bill 292 which features a P10 excise tax per liter on sugar-sweetened beverages. However the finality of the amount is still up for deliberation.

The Department of Finance (DoF) has backed the measure, which it considers an effective deterrent to consuming unhealthy beverages, following the department’s study of Mexico’s sugar tax.

“It was very good. What we learned in Mexico is that in per capita terms, consumption fell by around 6-7% especially among the children and poor,” said DoF Undersecretary and chief economist Karl Kendrick T. Chua.

The author of the sugar tax bill, Rep. Estrellita B. Suansing (Nueva Ecija), initially wanted specific percentage allocations for the P47 billion in projected additional revenue.

However, the appropriations committee, upon the urging of the DoF, ruled that more generic provisions for a health fund would provide flexibility for the Budget department to allocate funds depending on certain priority programs, as proposed by the Finance department.

“Instead of itemizing and indicating specific breakdowns of proceeds of revenues to fund important programs, it is first necessary to specify what are the priority programs, without mentioning the percentages. This will allow the departments involved, the DBM (Department of Budget and Management) and Congress, to expound in the budget what this allocation should be,” Mr. Chua said during the hearing yesterday.

Mr. Chua said that the DoF is still computing the net revenue impact of the adjusted substitute bill.

He added that the DoF will continue to urge legislators to adopt its version of the tax reform bill, especially the indexation to inflation of oil and automobile tax rates after three years of implementation.

The substitute bill that was approved last week stripped out that measure, along with the staggered implementation of automobile excise tax hike, and its upwardly adjusted bracket to five from four previously.

“We believe that the proposal of DoF is very sound. We have a lot of room to convince the plenary or the Senate,” he then told reporters on the sidelines of the hearing.

“We want indexation after three years, otherwise the revenues will fall after three years. Which significantly catching up with inflation. In principle everything will be indexed to inflation. Both the consumption side whether excise or VAT threshold, or the income side. Everything will be standard, it must be three years,” said Mr. Chua.

“Otherwise the next administration will have a problem coming to Congress again asking for something that should have been done a long time ago. Moving forward we will just follow the actual inflation, so that its fair,” he added.

The Finance department targets the passage of the bill in both chambers of Congress by mid-year, to be in time for budget preparations for fiscal year 2018.

Ways and means chairman Rep. Dakila Carlo E. Cua still maintains that the bill is on track for approval in the House before the June sine die break. -- Elijah Joseph C. Tubayan