Information, not taxation
The Department of Finance (DOF) is pitching to Congress the proposed Promoting Growth, Revenue, and Equity towards Socio-Economic Sustainability tax reform package that seeks to impose, among others, as much as triple the tax on sugary drinks to promote “healthier” communities and raise funds to support the implementation of the Universal Health Care Act.
Under the DOF’s proposal, the excise tax on sugar-sweetened beverages will be increased from P6 a liter to P20 a liter, while beverages using high-fructose corn syrup will be raised to P40 a liter from the current P12.
The DOF likewise sought to increase the excise tax by 5 percent a year and expand the coverage to include ice cream, frozen yogurt, and frozen desserts, while retaining exemptions for three-in-one coffee and flavored milk products on grounds that these are widely consumed by the poor and used in nutrition programs.
The added levy is estimated to generate an additional P25 billion to P34 billion in annual funding for the Philippine Health Insurance Corp. until 2030 plus another P7 billion in extra funds to improve public hospitals and clinics and help indigent patients.
Rising obesity
Raising the estimated revenues should be readily achieved, but will this latest proposal meet its more important objective of curbing excess consumption and thus help address rising obesity that is linked to a host of serious ailments including cardiovascular diseases and diabetes?
Past experience is, unfortunately, not exactly encouraging.
A 2024 study by the Congressional Policy and Budget Research Department (CPBRD) on the sugar-sweetened beverage tax that was introduced in 2018 as part of the Tax Reform for Acceleration and Inclusion Law showed that while the measure did lead to a spike in added revenues–about P38 billion–consumption during the first six years remained “robust.”
The sales volume of sugar-sweetened beverages that include soft drinks, powdered juice products, prepackaged sweetened tea, energy and sports drinks, and ready-to-drink juice posted “appreciable” annual increases.
Market growth was stable and even increased by 4.2 to 4.4 percent despite the price hikes resulting from the added excise taxes, indicating that demand remained durable even if the additional taxes were practically entirely passed on to the end-users.
‘Healthier’ alternative
This means Filipinos were still consuming products with added sweeteners, with some dedicated consumers merely switching from one sweetened beverage to another, say from soft drinks to ready-to-drink juices deemed to be a “healthier” alternative to carbonated drinks, thus on the whole defeating the purpose of the measure.
This is especially true for poor households that were found to continue to purchase soft drinks despite price increases as neighborhood or sari-sari stores that surround them “offer fewer, if any, alternative beverage options” that they can switch to, unlike the higher income households that can afford to purchase other beverages such as milk and wean themselves away from these sweetened beverages.
At the same time, the prevalence of obesity continues to surge, with the National Nutrition Council (NNC) estimating that 43 percent of Filipino adults are classified as overweight or obese as of the latest count, more than double the 20.2 percent level in 1998 and the 36.6 percent in 2019, a year after the current excise tax regime came into effect.
That obesity levels have reached “a level of public health significance” despite the hike in the excise tax suggests that the single measure is not nearly enough to achieve the stated goal of curbing obesity and easing the disease burden on society.
Twin objectives
As NNC Nutrition Information and Education Division officer-in-charge Jomarie Tongol pointed out, obesity is a result of a host of factors, from genetic predisposition to inadequate sleep, lack of physical activity, and an increasingly “obesogenic food environment” characterized by the widespread availability of processed and unhealthy food products and the high cost of fresh fruits and vegetables compared to highly processed food.
As the CPBRD noted, taxation by itself will not be sufficient in the long run. Massive information campaign on social media, schools, and communities must be implemented to curb consumption, it said.
Thus if the Marcos administration were to achieve its twin objectives of raising additional revenue and winning the battle against obesity and the chronic diseases, merely taxing sugary drinks is far from enough of a policy lever.
This measure should at the very least be paired with a massive information campaign on the dangers of excessive sugar intake and the urgent need to adopt a lifestyle change that will prioritize a balanced diet, exercise as well as adequate sleep.
The short and long-term gains from doing so in terms of a healthier citizenry and decreased burden on the public health system would indeed last far longer than any benefits to be derived from any additional excise taxes.
