February 1, 2024
Business World | https://www.bworldonline.com/the-nation/2024/02/01/573076/phl-house-thin...
A TAX on sweetened drinks has failed to stop Filipinos from consuming unhealthy beverages, forcing many of them to shift to cheaper alternatives instead, according to a House of Representatives think tank.
“While it has raised billions [of pesos] in revenues for the government, its capacity to curb sugar-sweetened beverage consumption is expected to vary wildly from product to product,” the Congressional Policy and Budget Research Department (CPBRD) said in a report posted on its website.
The government raised an average of P38 billion from 2018 to 2022 from the sugar tax. But it only managed to narrow the gap between the per liter prices of the most expensive sugar-sweetened beverages and more affordable variants.
“This, in turn, afforded consumers ample opportunities for substitution, the CPBRD said.
The government charges P6 per liter of sweetened beverages sweetened with caloric or noncaloric sweeteners and P12 per liter for beverages sweetened with high-fructose corn syrup amid a rising incidence of obesity.
The tax increased the price of imported soda by 20%, causing a 10% decrease in demand in 2018, the think tank said.
“This observation, in turn, suggests that Filipinos are, given prevailing prices and economic conditions, relatively insensitive to price increases in Coca-Cola,” according to the report.
It also noted that the sugar tax had failed to distinguish the risks of sugar content for each drink. “As a result, the tax fails to provide consumers with critical information needed to make truly informed decisions.”
The tax for sweet drinks should have a “three-tier system” based on sugar content to push manufacturers to resort to drinks with low-sugar content, the House think tank said.
“This tax structure can be strongly argued to have the capacity to nudge consumers towards low-sugar products and encourage manufacturers to keep the sugar content of their products as low as possible as it imposes appreciable costs on high-sugar, sugar-sweetened beverages,” it added.
While a specific tax per gram of sugar content would generate the most economically optimal outcomes, it is likely difficult, if not impossible, to administer, according to the report. “The next best alternative would be a tiered sugar content tax regime wherein tax rates are defined by sugar content cutoffs.”
It cited the United Kingdom soft drink industry levy, in which a one-liter bottle of Coca-Cola is taxed under the second tier given that it has over 7.5 grams of sugar per 100mL.
The think tank also noted that Filipino companies shifted from high-fructose corn syrup as sweeteners because of the higher tax.
“The paper therefore argues that a sugar content tax regime is more effective in giving consumers price signals that clearly distinguish between high-sugar, high-risk sugar-sweetened beverages and low-sugar, low-risk sugar-sweetened beverages,” it said.
Moving toward a sugar content-based taxation approach supported by legislation on consumer education could optimize health outcomes while minimizing unintended health consequences, it added. — Beatriz Marie D. Cruz