MANILA - The House Ways and Means Committee said Monday it found a P12.3 billion shortfall in excise tax collections on sweetened beverages.
Nueva Ecija 1st District Rep. Estrellita Suansing, the House Ways and Means Committee vice-chair, presented findings and recommendations after their investigation into the implementation of Section 150-B, or Excise Tax on Sweetened Beverages of the National Internal Revenue Code of 1997, as amended by Republic Act 10963, otherwise known as TRAIN Law.
Suansing said the committee found significant overhang between target revenues from tax and the actual revenue collection, in large part, due to an industry shift from the use of high-fructose corn syrup (HFCS), which the law taxes at a higher rate to sugar.
The report cited that the industry did not use HFCS in their production and that most of the sweetened beverages were taxed at the lower rate of six pesos (P6.00). “
According to a Department of Finance report, out of the target of P52 billion, total collections from the Bureau of Internal Revenue and the Bureau of Customs reached only P39.8 billion, or a shortfall of P12.3 billion in revenues generated in 2018.
Suansing also said they found weaknesses in the verification of the cause of the shortfall. It was explained that verifying the shift, could not be ascertained due to lapses in tax and product administration, such as delayed issuance of tax regulations on beverage product registration, weaknesses in the records-keeping and verification of imports of HFCS, among others.
He added that the panel also found failure to directly earmark revenues as mandated by the law, explaining that excise taxes are punitive, by nature and definition.
However, because the excise tax on sweetened beverages only aims to discourage consumption of sugar-sweetened beverages, and not to harm the domestic sugar industry, the law mandates the government to mitigate the impact of the tax on the industry by allocating revenues from the tax to fund programs under the Sugarcane Industry Development Act (SIDA).
Suansing's panel also noted that the Department of Budget and Management (DBM) cited low absorptive capacity of the Sugar Regulatory Administration (SRA) as one decisive factor for not earmarking more funds under the SIDA.
The panel recommended the following areas for improvement to improve revenue collection and administration:
- Agency audits of the implementation of the SB excise tax
- Validation of BIR beverage product registration and exemption
- Creation of a database of accurate import statistics of HFCS
- Improvement of FDA product testing and implement FDA post-marketing surveillance
- Amendment of the FDA mandate to include the evaluation of products
- Improvements in the absorptive capacity of the SRA to deliver programs to develop the sugar industry
- Submission by concerned agencies (Food and Drug Administration, SRA, DOF and BOC) of periodic status reports to the Committee for proper monitoring of deliverables.
The panel cited early efforts by the FDA to respond to committee recommendations, noting that the FDA has procured High Performance Liquid Chromatography (HPLC) equipment to increase its capability to verify manufacturers’ claims on sweetener content of products subject to the SB excise tax.