Proposed ‘junk food’ tax draws mixed reaction

The government’s proposal to tax “junk food,” as well as raise taxes on sweetened beverages, has drawn mixed reactions from business groups and economists.

At the same time, the House Ways and Means committee is “still studying the best form of a junk food tax, or whether to do it at all,” according to its chairman and Albay Rep. Jose Ma. Clemente S. Salceda.

“We will also look at inflationary impact — because there will definitely be price implications on taxes on food,” he said in a statement.

Finance Secretary Benjamin E. Diokno on Wednesday estimated that the proposed new taxes could generate an additional PHP 76-billion revenues in the first year of implementation.

Under the program, there will be a PHP 10 tax per 100 grams or PHP 10 tax per 100 milliliters on pre-packaged foods that lack nutritional value and go beyond the Department of Health’s specified thresholds for fat, salt, and sugar content. These products include confectioneries, snacks, desserts, and frozen confectioneries.   

It is also aiming to raise the sweetened beverage tax to PHP 12 per liter for any kind of sweetener used from PHP 6 per liter currently.

The country’s high obesity rates show there is a cause for the government-led efforts to cut consumption of salt and sweetened beverages, Mr. Salceda said.

Around 27 million Filipinos are overweight and obese, according to a survey conducted by the Department of Science and Technology’s Food and Nutrition Research Institute. Obesity among Filipino adults nearly doubled from 20.2% in 1998 to 36.6% in 2019.

“But we are also looking at research, and as for salt, it appears that the highest proportion of excess salt in diets come from added salt in food and sauces — so not necessarily ready-to-eat junk food. In that sense, taxation might not be the best measure,” Mr. Salceda said.

He said the House panel will give priority to tax measures “that are clearly progressive and hit the rich first,” such as taxes on motor vehicles and luxury goods.

Ebb Hinchliffe, American Chamber of Commerce of the Philippines, Inc. executive director, told BusinessWorld in a Viber message that it may not be a good time to increase taxes as the economy is still recovering from the pandemic.

“I would like to see solid data that show a PHP 10 tax would result in 21% decrease (in junk food consumption). To my knowledge, it didn’t help in other countries and was only one more source of revenue for the government. Consumers slowed down for a month but went back shortly no matter what the price. Same for the sweetened beverage tax,” Mr. Hinchliffe added.

Chris Nelson, British Chamber of Commerce Philippines executive director, said the proposal should be studied further especially its impact on inflation.

“We need to look at the details. We also would need to see what the basis is behind the calculation of the PHP 76 billion in additional government revenue. This requires a very careful study,” Mr. Nelson said in a mobile phone message.

Foundation for Economic Freedom (FEF) President Calixto V. Chikiamco said the proposal could be a “double-edged sword” for the country.   

“First, it’s regressive, hitting poor consumers more who spend more of their budget on food and drinks. Second, it could slow down consumption spending and lower gross domestic product (GDP) growth,” Mr. Chikiamco said via mobile phone.

“Sometimes, junk food is the only food that the poor can afford to consume. For example, instant noodles are affordable for students. Will they tax that? Healthy fresh food costs more. I’m not saying it’s a bad idea but the officials have to look at the problem in an all-around way,” he added.   

However, Mr. Chikiamco said that it could still be a good proposal if the revenue will be used to address malnutrition in the country.   

“If the revenue they raise is spent toward solving the malnutrition problem of children, then it’s okay. But if it’s lost through graft and corruption and spent on the wrong projects, yes, it may be considered anti-poor,” Mr. Chikiamco said.   

For Philippine Amalgamated Supermarkets Association President Steven T. Cua, the “junk food tax” could be seen as “anti-consumer.”

“Snack foods and sweetened beverages are not a nutrition necessity, but it provides some momentary relief from hunger and stress from one’s daily grind. It satiates the palates of those who cannot afford more substantive food like shawarmas, doughnuts, and burgers, which are not any more nutritious,” Mr. Cua said in a Viber message.

“If the DoF (Department of Finance) will check out consumer trends worldwide, it is moving towards growth in snacking. This volume should bring about an increase in collection of taxes. But of course, the DoF wants immediate tax collection upon production and not sales,” he added.

Mr. Cua said the proposal would also “not sit well” with junk food and sweetened beverage manufacturers in a consumer-led economy such as the Philippines.   

Meanwhile, Philippine Chamber of Commerce and Industry (PCCI) President George T. Barcelon expressed support for the Finance department’s proposal, saying this would help reduce consumption of junk food and sweetened beverages.

He told reporters on Wednesday evening the measure could also help address obesity among Filipinos.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said additional revenues from these new taxes could help pay the National Government’s debt which hit PHP 13.91 trillion at the end of April.

“New and higher taxes during better economic times make sense since there is an urgency to pay large debts incurred since the pandemic, though some of the debt are long-term in nature,” Mr. Ricafort said in a Viber message. — Revin Mikhael D. Ochave with inputs from Beatriz Marie D. Cruz