Taxing sugar

The government’s proposed TRAIN, or Tax Reform for Acceleration and Inclusion, could boost its popularity given the way it addresses festering issues from the previous administration’s tax policies, which were seen as oppressive especially for the middle class.

The package includes much-welcome income tax reforms. In the current system, only those earning below P10,000 a year are exempted from income taxes. In TRAIN, the exemption is raised to those earning less than P250,000 a year. In the current system, the highest tax bracket consists of those earning more than P500,000 a year. In TRAIN, it will be P1,450,000 a year.

Besides lowered income taxes, estate (inheritance) and donor’s taxes will be reduced to 6 percent. Micro businesses, or those with gross receipts of less than P3 million a year, will be taxed at a flat rate of 8 percent.

So far, so good, right?

What have drawn some protests are increased taxes on petroleum, but the government says these will have minimum impact on prices of commodities and services, with tables to show potential price increases that range from 0.9 percent for tricycles and 1.7 percent for the habal-habal of Mindanao, to 3.3 percent for jeeps, 3.4 percent for buses, and 4.1 percent for AUVs.

Some grumbling

There’s also some grumbling about a doubling of taxes on cars, which sounds tremendous but isn’t as bad as it sounds.

According to the Department of Finance, a Vios 1.3 will go up from P599,000 to P609,734, an Innova from P919,000 to P962,725, and a Land Cruiser 4.5 from P4.4 million to P5.4 million.

Not quite on the public radar yet is a sugar tax that will mean increases in the costs of sugar-sweetened beverages. A 1-liter bottle of Coke, for example, will go from P31 to P42.20, and a
350-milliliter bottle of Cobra from P21.20 to P25.10. The costs of Nestea, Tang, Eight O’Clock, even Yakult, will increase, too.

The Philippine Association of Stores and Carinderia Owners has complained that its mostly poorer customers will be
paying more for staple drinks, with soft drinks going from P16 to P25 and 3-in-1 sachets of coffee from P5 to P8. (Typically, I have heard complaints in urban poor communities that some sari-sari stores have jacked up prices even without the new taxes being approved.)

On the surface, this sugar tax does seem oppressive, especially to the poor. But the sugar tax is imposed in many other countries, such as Denmark, where soft drinks and sugar-flavored juices have been taxed since the 1930s. More countries have resorted to this tax in recent years: America came on board starting in 2014, with several cities now using the tax.

The rationale for the tax is simple: Increase the prices of beverages with sugar and you will decrease consumption, and as sugar consumption drops, you will have healthier people. The sugar tax is actually a response to the epidemic levels of obesity, diabetes and other illnesses caused by high sugar intake.

Put another way, sugar is put in the league of alcohol and tobacco products, and the sugar tax is a form of “sin tax”: If people are going to indulge in “sins” like smoking and drinking alcoholic and sugary beverages, then you should help shoulder the burden on society having to take care of you if that consumption leads to diabetes, heart disease and problems associated with obesity.

It all seems straightforward, but all kinds of arguments have been used against sin taxes, and now the sugar tax. Industry, meaning the manufacturers of these products, will come out claiming there is no proof that these products cause illness. I was hearing that with tobacco for the longest time ever, even from university professors (smokers, of course).

Then there’s the argument that such taxes violate people’s “freedom” to choose, even if it means a choice that leads to illness. Or, now, that these taxes are “antipoor” because it’s the poor who still mainly indulge in these “sins.”

I view the issue still from the viewpoint of public health, but more from the perspective of whether the sugar tax alone will bring down sugar consumption and lead to a healthier population. I see too little of programs to tackle alcohol- and tobacco-related health problems, which part of the sin tax revenues were supposed to fund. A simple example: We badly need programs on how to stop smoking. I’m an ex-smoker, and I used to joke, “It’s so easy to stop smoking; I’ve tried a thousand times.” Nicotine is a powerful addictive drug, and professional help is required to increase the chances of dropping the “drug.”

Or take alcohol awareness programs. There’s just no way to compete with the expensive and slick advertising of alcoholic beverages, where drinking is now explicitly connected with being able to score for the night.

Amsterdam’s example

I feel we should be studying other good practices to reduce the consumption not just of sugary beverages but of junk foods in general. For example, Amsterdam has an ongoing comprehensive program in one of its low-income neighborhoods, featuring a package of measures to fight obesity, some of which we can implement even without legislative action. Schools now ban high-sugar juices and sponsorships of fast-food companies. Birthday parties in schools are banned because people tend to bring in junk food. (We’ve seen some private schools in the Philippines with similar initiatives, and they should be better publicized as models.)

The city government of Amsterdam is also holding cooking classes that foster healthy eating but still take off from ethnic dishes, because the neighborhood has many migrants. Kebabs, for example, use lean chicken instead of pork. Honey and dates are used instead of sugar.

It has begun to install more water fountains, reducing the need among residents to buy sugary beverages when thirsty. Even more importantly, recognizing that obesity is a matter of not just what one eats but also how one uses the calories, it subsidizes the entry of low-income children in sports clubs and their access to sports facilities.

The city government has left no stone unturned in understanding obesity. Schools encourage families to eat together, which means parents—perhaps convinced about healthy eating—can prepare better food and monitor what their children are eating.

The children get all kinds of advice in school, including getting enough sleep. Scientific research is clear in showing that when one is sleep-deprived, one tends to eat more.

A sugar tax alone might not have too much impact; people are just too willing to die for sugar. We need to work more on the demand side, maybe use the still large amounts of unused sin taxes to launch comprehensive information and education campaigns in schools to tackle not just the sugar in beverages but junk eating in general.

mtan@inquirter.com.ph