PHILIPPINES May 2020
 
Philippines considers proposal to impose tax on Snacks and Fast Foods
 
Philippines’ National Tax Research Center (NTRC) is pushing for the imposition of a 10 to 20% excise tax on unhealthy food – like snacks and fast foods, which could bring in from Pesos 35 billion (US$700 million) to Pesos 70 billion (US$1.39 billion) in annual tax revenue to the government, while also discouraging the consumption of such food products.
According to a statement made by NTRC, “The higher the tax rate to be imposed, the higher the increase in product price,” adding that higher prices will then lead to lower consumption of junk food.
Citing from various research, NTRC said that the rate needs to be at least 20% for the tax to have a significant impact on obesity and cardiovascular disease. Aside from the tax rate, the NTRC also emphasised the importance of considering the type of tax that should be imposed, whether specific or ad valorem.
The think tank pointed out that specific taxes are easy to administer and generate predictable revenues but requires regular evaluation and adjustment so the collections could keep up with inflation. Taxing snacks could also prompt manufacturers to modify their products like lowering sodium content at a minimal so that these products will not be affected by the tax.
On the other hand, ad valorem excise taxes automatically adjust to inflation and have a larger impact on industry profits but they generate less predictable revenues. Under this scheme, manufacturers may cut their prices to maintain volume and generate wide gaps between cheap and expensive products. This setup, however, could encourage consumers to switch to cheaper products that could be just as harmful.
Besides taxing unhealthy foods, the NTRC also recommended subsidising healthy foods, restricting food advertising and possibly eliminating advertisements on junk foods, candies, soft drinks, fast-food meals and sugared cereal for children.
It is noteworthy that the NTRC’s recommendation of an imposition of a 10 to 20% excise tax rate on junk food is also higher than the 8? valorem excise tax being proposed earlier by the economic team under its health “sin” tax proposal to raise revenues as the government increases its spending due to the COVID-19 pandemic.
The Philippines government is also looking at imposing a 6% tax on sweetened beverage.
 
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