October 25th, 2022
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) sounded the alarm that the government could lose as much as P2.5 billion per month in taxes from sweetened beverages under Republic Act No. 10963 or the TRAIN Law, if industrial beverage makers are unable to get sugar for their operations.
“Jobs are on the line. Taxes are on the line. Growth is on the line, if industrial users are unable to get their sugar. Consumers can shift from refined to raw sugar, or even shift preferences altogether to other alternatives. But industrial users always need high-grade refined sugar,” Salceda said.
“Right now, beverage makers only have around four days’ worth of inventory at a time. They usually operate at 21 days’ worth of inventory. If they are unable to procure sugar from the 150,000 MT sugar import order of the SRA, we’re going to see more work stoppages. Beverage plants can only produce their zero-sugar or ‘diet’ varieties. That doesn’t account for much of the demand,” Salceda added.
The House tax panel chair explained that his committee was expecting P37 billion in sweetened beverage taxes if the sugar crisis had not hit. He says that as restaurants begin to reopen more widely, and as the economy returns to a greater sense of normalcy, demand of sweetened beverage is moving up.
Companies, however, are at serious risk of being completely unable to meet demand because they are unable to import directly and are forced to make do with “whatever amount of refined sugar they can get from traders.”
“They have to make do with volumes like 9,000 MT from individual traders. That may sound like a lot. But that’s one or two days of peak production at these beverage makers.”
Salceda also took to task the Sugar Regulatory Administration’s ‘pro-rated’ system of allocating sugar import orders.
“Pro-rated based on what, exactly? I was not able to get an answer to this when the Committee on Agriculture and Food held hearings on the sugar issue,” Salceda, who is also Vice Chair of the agri panel, added.
Salceda is instead suggesting that industrial users be allowed to import at least 200,000 MT more of refined sugar, “at more realistic schedules.”
Earlier this month, the SRA had to amend its sugar import order to allow late arrivals of imports to come in.
“The SRA issues an import order, allocated to some random set of traders, and then it sets a deadline, so all the sugar has to arrive all at once. That further increases prices of sugar, because then we have to take care of so much warehousing.”
“Here’s my proposal, which the House Committee on Ways and Means will forward at the appropriate time: Make import allocations pro-rated based on excise tax payments, so that we have some empirical basis for the allocation. It’s also an incentive for bottler companies to pay their taxes right. If you don’t pay your taxes right, you don’t get enough sugar.”
“And then we set the arrival schedule more realistically, say every month or every quarter, rather than all at once, so our industrial users don’t have to shoulder unnecessary warehousing costs due to the imports having to arrive all at once.”
“Reliable and cheap sugar supply is the future of our food and agriculture processing sector. If you don’t have cheap sugar, you won’t have a big food processing sector. We’ll be forced to import products with sugar anyway, like we do 3-in-1 coffee. And they won’t produce jobs here. We won’t produce value-added for farmers. Being import-averse is the worst option in this case.”