Finance Secretary Ralph Recto said they are scrapping the tax reform on junk food and sweetened beverages from its key reforms to temper the inflation rate.
Current data shows inflation rate in December declined to 3.9 percent, from 4.1 percent in November. However, average inflation inched up to 6 percent in 2023 from 5.8 percent in the previous year.
Recto said that the national debt, which declined to P14.27 trillion as of the end of September 2023, is "manageable."
DOF shelves junk food, sugary drink tax proposal
Jan 24, 2024 07:05 AM
At a glance
Department of Finance (DOF) Secretary Ralph G. Recto on Wednesday revealed that they are no longer pursuing the tax reform on junk food and sweetened beverages due to a higher inflationary environment
In a joint press conference with the Bureau of Customs and the Bureau of Internal Revenue, Recto said such an additional tax is unnecessary because the debt to gross domestic product (GDP) ratio has improved.
“I'm not considering it," Recto told reporters. "Like I said, that's number one. Inflation is high. When you impose taxes, that is also inflationary. So I don't think now is the time to impose.”
The finance secretary cited the debt-to-GDP data during the 2000s, particularly from 2003 to 2004, which ballooned to 70 percent and then went down between the ranges of 40 percent during the 2010s.
However, due to the need for cash aid and the spur of infrastructure projects during former president Rodrigo Duterte’s term, the government had to borrow a record-high P12.79 trillion which the Marcos administration inherited.
Meanwhile, the debt-to-GDP ratio rose to 63.5 percent at the end of Duterte’s term, which is higher than the internationally prescribed best practice of 60 percent.
This prompted the current administration, in the hands of former Finance Secretary Benjamin E. Diokno to propose new tax measures, such as the junk food and sweetened beverages taxes.
Now that the debt-to-GDP ratio has improved to 60.2 percent in the third quarter of 2023 and debt declined to P14.27 trillion in end-September 2023, new Finance Secretary Recto said that the debt is already "manageable."
“Like I said, our debt is manageable. There is no fiscal crisis,” he added.
The junk food and sweetened beverages tax program, one of Diokno’s key reforms, sought to impose a P10 per 100 grams or P10 per 100 milliliters tax on pre-packaged foods lacking nutritional value.