THE SENATE committee on ways and means is eyeing a multi-tiered excise tax based on sugar content, but capped at P5 per liter instead of the Finance department’s volume-based P10 per liter.

During the Senate hearing on the sugar-sweetened beverage tax measure under the Tax Reform for Acceleration and Inclusion (TRAIN) yesterday, Senator Juan Edgardo M. Angara floated the idea of the multi-tiered tax pegged on a beverage’s sugar levels to make the tax more targeted.

The TRAIN proposal imposes a flat rate of P10 per liter on sugar-sweetened beverages regardless of the sugar content.

“It does not distinguish between beverages (with varying sugar content). So it’s a bit blunt if it’s not targeted to those sweetened ones. We might look into the possibility of specifying sugar levels, to distinguish between sweeter beverages and those which are not so sweet,” said Mr. Angara, who chairs the ways and means committee.

“We want to get the consensus where the levels will be set, but for the senators, they’re okay with three tiers, as long as the maximum level does not exceed P5 per liter,” said Mr. Angara.

He said that this approach would incentivize beverage manufacturers to lower their sugar content, “so you can reward those who put less sugar in their beverages.”

Federation of Philippine Industries President Jesus L. Arranza however said that the multi-tiered proposal may be anti-competitive.

For its part, the Department of Finance (DoF) said that it will let the Department of Health (DoH) decide on the taxation structure of sugar-sweetened beverages, as the program is primarily intended as a health measure.

“I will defer to the DoH,” Finance Undersecretary Karl Kendrick T. Chua told reporters yesterday on the sidelines of the hearing.

“[The proposals] have pros and cons. It now depends on which one will deliver the best health impact because its really a health measure… so we will meet that objective before the revenue,” he said.

The Finance department’s volume-based flat P10 rate is more attractive from a fiscal perspective as it is easier to administer.

DoH Undersecretary Mario C. Villaverde however backed the original Finance department proposal, but said he is open to studying the health benefits of the multi-tiered system.

“Our position is to support  the house bill version… It’s much simpler, easier to enforce and administer because of the simplicity of the mechanism,” he said.

Mr. Villaverde also defended the P10 proposal to burden the rich more rather than the poor, as they consume bulk of the sugar-sweetened beverages.

As for the proposed P5 cap, Mr. Villaverde said that it would not be enough to discourage consumers to shift away from sugar-sweetened beverages.

“Generally it should be around 20% additional tax. P5 is only around 10%.”

Industry representatives also proposed before the committee to include non-caloric and artificial sweeteners, but this approach has yet to be studied by the panel.

However Mr. Villaverde noted that artificial sweeteners have no direct link to the development of diabetes.

“Its effect is more on the taste buds. People get a taste for sweets and crave sweetened food and beverages and that means craving more sugar. That’s the downside of it,” he said.

“The consumption of the rich is already high. So the growth of consumption will only be marginal because they are the number one consumers. But among the poor, their consumption is increasing, and we would want to prevent them from consuming more. So the additional tax would become preventive, before their consumption increases,” added Mr. Villaverde.

As for the effect on the beverage manufacturers, audit firm KPMG R.G. Manabat & Co. reported that businesses will take between 6.1 years to 15.8 years to recoup their forgone revenue from the imposition of the sugar-sweetened beverage tax.

It also said that an average small store will lose about P300 in daily revenue, noting that 40% of store sales are from such beverages. — Elijah Joseph C. Tubayan

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