On the push of House tax committee for stronger enforcement of sweetened drinks tax

April 26th, 2021

House tax committee pushes for stronger enforcement of sweetened drinks tax; Salceda says tax panel will keep the pressure with probes on excisable products

House Committee on Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) says that the tax panel will continue to exert its pressure on implementing agencies to enforce excise taxes more strictly to curb smuggling (including misdeclaration) and tax evasion.

Salceda made the remarks following the Committee’s approval of the Committee Report on House Resolution No. 227 that directed the Committee to determine the challenges in implementing the excise tax on sweetened beverages and assess the accomplishment of the legislative intent on earmarking of funds to sugar farmers.

“Because this is no time to raise new consumption taxes, we should catch those who escape current taxes so that we can fund our COVID-19 response,” Salceda said.

“When we were raising new excise taxes from 2017 to 2019, we were told to just strengthen tax enforcement instead of passing new taxes. I said, we can do both. The new taxes are here. It’s time to strengthen enforcement,” Salceda added.

Committee efforts bearing fruit

“Our efforts to work with implementing agencies are already bearing fruit. On tobacco, the BIR is now modifying its policies on cigarette export tax stamps to make the system less prone to evasion.”

“On abuse of freeport privileges for smuggling, the DTI, DOF, and PEZA are now working to strengthen law enforcement in the area. Fuel-marking is now also stronger, with mechanisms to verify volume. The BOC is also strengthening enforcement on customs-bonded warehouses,” Salceda said.

“Now, the Food and Drug Administration is procuring new machines to verify sugar content in response to our Committee’s pressure,” Salceda added.

“These hearings have an impact on our fiscal strength. I wrote the Secretary of Finance that we will continue these efforts.”

Stronger enforcement of sweetened drinks tax pushed

The excise tax on sweetened beverages took effect on January 1, 2018 as mandated by Republic Act No. 10963, otherwise known as the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

During its investigation, the Committee found a significant deficit in the target tax revenues primarily due to an industry shift from the use of high-fructose corn syrup (HFCS). However, verification of the shift cannot be ascertained due to lapses in tax administration and implementation.

The investigation also discovered that allocated tax revenues to fund programs for sugarcane farmers under the Sugarcane Industry Development Act (SIDA) was not properly implemented with the Department of Budget and Management citing the low absorptive capacity or capacity to use public funds of the Sugar Regulatory Administration (SRA) as a critical factor.

Presiding Officer Estrellita Suansing discussed the findings to the Committee members.

The Committee has recommended the following points of action to improve revenue collection and administration:

1. Agency audits of the implementation of the sweetened beverage excise tax;
2. Validation of Bureau of Internal Revenue (BIR) beverage product registration and exemption;
3. The creation of a database of accurate import statistics of HFCS;
4. Improvement of Food and Drug Administration (FDA) product testing and implement FDA post-marketing surveillance;
5. Amendment of the FDA mandate to include the evaluation of products;
6. Improvements in the absorptive capacity of the SRA to deliver programs to develop the sugar industry; and
7. The submission by concerned agencies (FDA, SRA, Department of Finance and Bureau of Customs) of periodic status reports to the Committee for proper monitoring of deliverables.

The investigation resulted in FDA’s fast-tracking of the procurement of High-Performance Liquid Chromatography (HPLC) equipment to increase its capability to verify manufacturers’ claims on sweetener content of products subject to the SB excise tax.