DOF supports higher soft drinks tax

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MANILA – The Department of Finance (DOF) last week expressed its support of the Congress’ decision to increase tax on soft drinks in order to increase revenue collection.

“We are supportive of this congressional initiative. We are prepared to join the technical working group tasked to write a substitute bill to fine-tune the proposal,” said Finance Undersecretary Jeremias N. Paul Jr.

Congress already started the discussion for House Bill (HB) No. 3365, authored by Rep. Estrelita B. Suansing of Nueva Ecija. The said bill aims to increase the ad valorem tax on soft drinks and other carbonated drinks by 10 percent.

The additional tax will generate P5 billion in revenues every year. At the same time, the bill intends to cut down the consumption of sugar-rich drinks which are believed to be a cause of health problems including obesity and diabetes.

Suansing said that the revenues from the soft drink tax may be used for a “rehabilitation fund” that the government may use to assist calamity-stricken areas.

Meanwhile, Bureau of Internal Revenue (BIR) Commissioner Kim S. Jacinto-Henares said that her agency is also supporting the soft drink tax bill.

According to Henares, soft drink taxes will amount to P14 billion based on DOF’s computation.

However, Henares said that the taxes from the soft drink bill is not enough to compensate for the P30 billion annual loss once the higher cap on tax-exempt bonuses will passed into law. Starting next year, both houses of Congress are working to increase the tax-exemption cap on 13th month pay and other bonuses.

Meanwhile, soft drink manufacturing companies are opposing the said bill.

Citing a research from the University of Asia and the Pacific in 2008, it showed that additional tax would result to lowered revenues by a minimum of 16 percent and gross income loss of 30 percent.

Likewise, the companies said that additional taxation would result to less sales and thus may lead to cuts.