Drink retailers caught in fog of confusion as the Philippines' Sugar Tax creeps in

By Lester Wan contact

- Last updated on GMT

President Rodrigo Duterte signed TRAIN into law over a year ago, in December 2016; it officially takes effect this year. ©Getty Images
President Rodrigo Duterte signed TRAIN into law over a year ago, in December 2016; it officially takes effect this year. ©Getty Images

Related tags: Soft drink, Tax

The Philippines' Tax Reform for Acceleration and Inclusion (TRAIN) law, which includes a new sugar tax, came into effect at the turn of the year, bringing with it a wave of confusion in the Philippines' drink sector.

Some stores had begun increasing the prices of sugar-sweetened beverages (SSBs) from as early as 2 January, on the "suggested retail price of the supplier".​ In one case, the price of a 1.75 litre bottle of drink was raised by Php10.

Sari-sari (sundry shops and micro-retailers) store owners also corroborated that suppliers had simply told them prices would go up in January because of President Rodrigo Duterte's tax law.

Previously, we reported that more than 300,000 people had signed a petition​ by the Philippines' association of sari-sari shop and small eatery owners (Pasco) to oppose the 'Sweet Tax'.

Warnings feeble

Meanwhile, the Philippines' Department of Trade and Industry (DTI) was said to have recently ordered retailers not to raise prices until 15 January, as old stocks of soft drinks should not be affected by the SSB bill.

Trade Secretary Ramon Lopez informed reporters that soft drink companies have been confirming with the DTI the volumes of stock left with distributors and retailers.

According to him, deliveries take place twice a month, which means the usual amount of stock lasts for a period of about two weeks.

"Manufacturers and retailers should not increase prices. We watch out for hoarders and profiteers. We monitor price changes closely, and also ensure that prices follow the suggested retail price,"​ he said.

He warned that there would be penalties if instructions were not followed. The Department of Finance (DOF) had also warned retailers not to prematurely set elevated prices for stock they had purchased before the commencement of the TRAIN law.

Nonetheless, the DOF conceded that it does not have the capability or resources to check entire inventories of all the products affected by the new law.

The DOF said the initial confusion over pricing and the implementation of the price hike was to be expected.

DOF undersecretary Karl Chua said the department "does not see any major problem"​ moving ahead, and that they would soon overcome these "growing pains"​.

No evading the law?

Duterte signed TRAIN into law over a year ago, in December 2016; it officially takes effect this year.

TRAIN means lower personal income taxes for many Filipinos but higher consumption taxes, especially on soft drinks.

Under the new law, beverages with caloric and non-caloric sweeteners are to be taxed at Php6 per litre, and beverages with high-fructose corn syrup (HFCS) are to be taxed at Php12 per litre.

Pasco had said this would put many of its 6,000 members, and many more micro-retailers out of business.

The Beverage Industry Association of the Philippines had wanted the tax to be based on sugar content instead of on a per-litre basis.

In order to avoid the tax, drink makers such as Pepsi-Cola Products Philippines Inc. (PCPPI) were reportedly planning to reformulate their drinks this year to save costs.

However, Pepsi said in a statement: "Let it be known that PCPPI has not issued any official statement on the company's tax planning measures as a reaction to the impending implementation of the new tax reform law.

Pepsi's current formulation uses 60% sugar and 40% HFCS, which draws a higher tax rate.

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