Foreign businesses call for reconsideration of proposed taxes on junk food, sweetened beverages

The Joint Foreign Chambers of the Philippines (JFC) on Thursday called for the government to reconsider proposals to implement additional taxes, saying that it is not the right time as the middle class is still recovering from the COVID-19 pandemic.

The JFC — led by foreign industry leaders in the Philippines — recommended a “careful reassessment” of the proposals to implement new taxes on junk food and hike the existing tariffs on sugar-sweetened beverages.

“We believe it is not the right time to introduce additional taxes on products primarily consumed by middle and lower middle-class households because the country is still recovering from the pandemic and a prolonged period of high inflation,” the statement read.

“The proposal would also affect micro and small enterprises that rely on selling these products as a source of income,” it added.

This comes as the economic team is looking to impose a P10 per 100 grams or P10 per 100 milliliters tax on pre-packaged foods lacking nutritional value, and hike the sweetened beverage tax rate to P12 per liter this year.

The proposed taxes are expected to generate P76 billion in revenues during the first year and result in a 21% reduction in the consumption of junk food. Revenues will be used to finance socioeconomic programs.

The Philippines has continued to report inflation above the government’s target range of 2.0% to 4.0%, with the latest print of 6.1% in May marking the fourth straight month of deceleration.

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) expects inflation to average 5.4% this year, before falling within the target range at 2.9% in 2024.

“Imposing additional taxes will only strain the capacity of businesses in affected sectors to continue operations and grow their businesses, especially when issues related to the supply of certain raw materials remain unsolved,” the JFC said.

“This could potentially reduce competition in the market to the detriment of Filipino consumers and the growth of the economy driven by consumption,” it added.

The JFC has since recommended that the government study the impact of the existing taxes under the Tax Reform for Acceleration and Inclusion (TRAIN) Law before any additional tariffs are imposed.

“We also strongly recommend the prioritization of improvements to tax administration — such as in the proposed Ease of Paying Taxes Act — and non-tax interventions as alternative, non-inflationary measures to raise government revenues and improve health outcomes of Filipinos,” it said.

The JFC counts as members the American Chamber of Commerce of the Philippines, the Australia-New Zealand Chamber of Commerce of the Philippines, the European Chamber of Commerce of the Philippines, the Japanese Chamber of Commerce and Industry of the Philippines, the Korean Chamber of Commerce Philippines, and the Philippine Association of Multinational Companies Regional Headquarters. — RSJ, GMA Integrated News