[Vantage Point] ProGRESS: When tax relief comes with a P40 price tag

The Philippine government has unveiled a controversial tax proposal under its ProGRESS initiative, which aims to cut income taxes while simultaneously increasing excise levies on sweetened beverages. The plan seeks to boost disposable incomes for citizens by raising the personal-income-tax exemption threshold to P350,000, but it also introduces steep hikes on sugary drinks. Under the proposal, the excise tax on beverages containing sugar or other covered sweeteners will rise from P6 to P20 per liter, while those using high-fructose corn syrup will face an even steeper increase, from P12 to P40 per liter. These adjustments represent a 233% increase in excise rates, meaning the government would collect over three times the current amount on each taxable liter. The policy creates a complex financial dynamic, as the government plans to offset the loss of revenue from lower income taxes by collecting more from the beverage sector. This approach raises questions about the true beneficiaries of the tax changes. While the government claims the move will give more money directly to Filipino workers, critics argue that the burden of these new taxes may fall disproportionately on consumers, particularly low- and middle-income families. The core issue lies in determining who ultimately absorbs the additional P14 or P28 per liter in excise charges, whether it is businesses, manufacturers, or the end-users. The proposed tax hike echoes past policies, such as the TRAIN law implemented in 2018, which introduced similar excise duties on sweetened beverages. Researchers analyzing the immediate effects of TRAIN found that beverage prices rose by an average of 20.6% in sari-sari stores within a month of implementation. Supermarket prices also climbed, though slightly less, at around 16.6%. Sales in sari-sari stores dropped by approximately 8.7% during the same period. Companies responded by adjusting their strategies, including reformulating products to reduce reliance on taxed ingredients. For example, Coca-Cola secured regulatory approval to alter its sweetener composition following the imposition of higher taxes on high-fructose corn syrup. These historical trends suggest that the current proposal may follow a similar trajectory. With the new excise rates, the cost of a two-liter bottle of a qualifying beverage could jump significantly. At the current P6 rate, a two-liter drink incurs a P12 excise charge. Under the new rules, that figure would climb to P40, an increase of P28. For beverages using high-fructose corn syrup, the excise would rise from P24 to P80 on the same volume, adding P56 to the tax burden. While these figures do not necessarily translate directly to retail price hikes, industry experts warn that manufacturers may struggle to absorb the added costs without passing them on to consumers. The potential ripple effects of the tax changes extend beyond individual purchases. The beverage supply chain involves multiple stakeholders, including producers, distributors, retailers, and consumers. Any increase in excise taxes at one point in the chain could lead to adjustments throughout the system. Some businesses might choose to reformulate products, adjust packaging sizes, or shift production methods to minimize the financial strain. Others may simply raise prices, leading to reduced consumer spending on non-essential items. In either case, the final impact on household budgets remains uncertain. The debate surrounding the ProGRESS tax package highlights broader economic and social considerations. While there is a recognized public health rationale for taxing sugary drinks, the current proposal appears to prioritize fiscal recovery over long-term wellness goals. Critics argue that the policy lacks transparency regarding its overall impact on household finances. They emphasize the need for the Department of Finance to release detailed analyses showing how the combined effect of income tax cuts and beverage tax hikes will influence actual purchasing power for ordinary Filipinos. Without such clarity, the effectiveness of the policy, and its fairness, remains open to interpretation.