DOF questions beverage tax payments
Published Jan 3, 2019 12:00 am
By Chino S. Leyco
The beverage manufacturers are likely not paying the correct taxes, Finance Undersecretary Karl Kendrick T. Chua declared after the government saw its below-target revenue collections from sugar-sweetened drinks in January to October last year.
Karl Kendrick T. Chua
In a statement, Chua said that he believes the Bureau of Internal Revenue (BIR) should "determine whether beverage manufacturers are paying the correct amount and type of tax as mandated under the tax reform for acceleration and inclusion (TRAIN) Law.”
Chua said there are “possible discrepancies” in the sugar-sweetened beverage (SSB) excise tax payments by the manufacturers, which dragged down the revenue collections at end-October last year.
Based on the Department of Finance (DOF) data released yesterday, excise tax on SSBs, which is under the first tax reform law, missed its collection target in the first 10 months last year by P10 billion.
The DOF had expected P40 billion from SSBs, but the BIR only generated around P30 billion from the new levy slapped on sugary drinks effected January 2018.
The TRAIN law mandates a P6-per-liter excise on beverages using caloric and non-caloric sweeteners and P12 per liter on beverages using high-fructose corn syrup (HFCS). Milk and 3-in-1 coffee mixes are exempted from SSB tax.
Because of the two-classifications of SSBs, Chua said “my hunch is that those that are supposed to pay the P12 tax are only paying P6."
Citing data from the Department of Health (DOH) and the Food and Drug Administration (FDA), Chua claimed that as of October, only one company, Coca-Cola, has secured an FDA approval to convert its sweetener from HFCS to sugar or other caloric or non-caloric sweeteners, which is charged a lower tax of P6 per liter.
Other companies that have been determined to be using HFCS as beverage sweeteners still have to apply for FDA approval, which is a requirement before they could shift to caloric or non-caloric sweeteners with the lower tax rate of 6 percent, Chua said.
“The FDA approved only the conversion for Coke, and that was just last August. So I think many are paying P6 when they should be paying P12. That is our concern. I suggest that the BIR conduct an audit (on these companies),” Chua said. “They cannot just change the content per the FDA.”
BIR Deputy Commissioner Arnel Guballa said that the bureau has already started checking the tax payments of beverage manufacturers and sending deficiency assessments to correct the SSB tax discrepancies.
Excise tax collections on SSBs from large taxpayers amounted to P29.74 billion for the first 10 months of 2018, while another P184.4 million was collected from other SSB taxpayers, for a total of P29.92 billion.
The BIR collected a total of P7.70 billion in SSB excise taxes in the 1stquarter of the year, P9.95 billion in the second quarter, P8.64 billion in the 3rd quarter, and P3.63 billion in October.
Despite the shortfall, Finance Secretary Carlos G. Dominguez III noted that the SSB tax has significantly contributed to the state coffers, bringing in an additional P100 million a day in revenues, or about P3 billion a month. Around P100 million a day was the operational target set by the DOF for the collection of the SSB tax.
Karl Kendrick T. Chua
In a statement, Chua said that he believes the Bureau of Internal Revenue (BIR) should "determine whether beverage manufacturers are paying the correct amount and type of tax as mandated under the tax reform for acceleration and inclusion (TRAIN) Law.”
Chua said there are “possible discrepancies” in the sugar-sweetened beverage (SSB) excise tax payments by the manufacturers, which dragged down the revenue collections at end-October last year.
Based on the Department of Finance (DOF) data released yesterday, excise tax on SSBs, which is under the first tax reform law, missed its collection target in the first 10 months last year by P10 billion.
The DOF had expected P40 billion from SSBs, but the BIR only generated around P30 billion from the new levy slapped on sugary drinks effected January 2018.
The TRAIN law mandates a P6-per-liter excise on beverages using caloric and non-caloric sweeteners and P12 per liter on beverages using high-fructose corn syrup (HFCS). Milk and 3-in-1 coffee mixes are exempted from SSB tax.
Because of the two-classifications of SSBs, Chua said “my hunch is that those that are supposed to pay the P12 tax are only paying P6."
Citing data from the Department of Health (DOH) and the Food and Drug Administration (FDA), Chua claimed that as of October, only one company, Coca-Cola, has secured an FDA approval to convert its sweetener from HFCS to sugar or other caloric or non-caloric sweeteners, which is charged a lower tax of P6 per liter.
Other companies that have been determined to be using HFCS as beverage sweeteners still have to apply for FDA approval, which is a requirement before they could shift to caloric or non-caloric sweeteners with the lower tax rate of 6 percent, Chua said.
“The FDA approved only the conversion for Coke, and that was just last August. So I think many are paying P6 when they should be paying P12. That is our concern. I suggest that the BIR conduct an audit (on these companies),” Chua said. “They cannot just change the content per the FDA.”
BIR Deputy Commissioner Arnel Guballa said that the bureau has already started checking the tax payments of beverage manufacturers and sending deficiency assessments to correct the SSB tax discrepancies.
Excise tax collections on SSBs from large taxpayers amounted to P29.74 billion for the first 10 months of 2018, while another P184.4 million was collected from other SSB taxpayers, for a total of P29.92 billion.
The BIR collected a total of P7.70 billion in SSB excise taxes in the 1stquarter of the year, P9.95 billion in the second quarter, P8.64 billion in the 3rd quarter, and P3.63 billion in October.
Despite the shortfall, Finance Secretary Carlos G. Dominguez III noted that the SSB tax has significantly contributed to the state coffers, bringing in an additional P100 million a day in revenues, or about P3 billion a month. Around P100 million a day was the operational target set by the DOF for the collection of the SSB tax.