The Philippines would be violating a global trading rule if it pushes forward with a sugar-sweetened beverage tax that doubles the rate on imported sugar in favor of its locally sourced counterpart, sending the “wrong signal” to foreign investors and trading partners.
Alexander Feldman and Ernest Bower, top officials of the US-Asean Business Council and Center for Strategic and International Studies (CSIS), issued the warning in a joint statement on Wednesday.
Congress is consolidating two versions of the first package under the Duterte administration’s tax reform program.
Both organizations back both versions for the most part, but said the SSB tax would send a message to foreign investors “that the Philippines is willing to violate global trading rules.”
While they did not name which particular bill they have reservations with, their warnings describe the SSB tax as outlined in House Bill No. 5636.
“The SSB provisions call for a doubled tax rate on sweeteners that are produced largely outside the Philippines but play a critical role in meeting Filipino demand for high quality and affordable food and beverage products. If passed as drafted, the legislation will hurt Philippine competitiveness at a time when other countries in Asean are stepping up their competitiveness for foreign direct investment,” they said.
“Thus, this discriminatory SSB tax provision sends the wrong message at exactly the wrong moment. If passed, the law will draw complaints in the World Trade Organization (WTO) and have a substantial chilling effect on foreign direct investment (FDI),” they added.
They echoed the sentiments of local business groups that opposed the SSB tax because of its impact on consumers, as well as the possible backlash on jobs, consumer choice, and investments.
HB 5636 wants to slap P10 per liter for SSBs using local sugar and P20 for those using imported sugar. This, experts said, would violate a rule in the World Trade Organization that prevents taxing imported products at higher rates to favor domestic ones.