The Department of Finance (DOF) has proposed expanding the coverage of the country’s sweetened beverage (SB) tax to include ice cream, frozen yogurt and other edible frozen products as part of a broader tax reform package.

Under the proposal, edible frozen products such as dairy and plant-based ice cream, iced milk, water-based products such as sorbetes and ice lollies, and flavored and unflavored frozen yogurt would be placed under a new product category subject to the SB tax.

In August, the DOF said the proposed measures are part of the broader tax relief initiatives under the Promoting Growth, Revenue, and Equity towards Socio-Economic Sustainability (ProGRESS) package, acting as compensation for revenue losses from the raised income tax threshold as proposed by the President in his July State of the Nation Address.

“ProGRESS is a very timely intervention because many of our stakeholders, including legislators, are asking for a meaningful tax relief or fiscal relief for the middle income classes,” Finance Undersecretary Karlo Adriano said in a 3 August briefing.

“The middle income class pay a lot of taxes, but they're not poor enough to qualify for the ayudas, but not rich enough to have a very comfortable life,” he added.

As part of the proposal, the DOF wants to raise the excise tax on sweetened beverages to P20 per liter for sugar-sweetened drinks and P40 per liter for those using high-fructose corn syrup. The measures are projected to generate P296.97 billion through 2030.

Adriano said the department initially considered removing the exemption for three-in-one coffee and flavored milk products. However, the proposal was set aside after the department determined that these products are primarily consumed by low-income households and are used in government nutrition programs.

“We’re open to removing the exemption, and we will defer to the Department of Health for the coverage of the SB tax,” Adriano said in a Monday House briefing.

The DOF is also proposing to increase the excise tax by 5 percent every year. The current SB tax is P6 per liter for beverages containing caloric or noncaloric sweeteners, which the DOF wants to raise to P20 per liter.

For beverages containing high-fructose corn syrup, the current tax is P12 per liter, which the department wants to increase to P40 per liter.

Products that would remain exempt include plain milk and milk drink products without added sugar, all milk products, medically indicated beverages, 100 percent natural fruit and vegetable juices, unsweetened tea, and three-in-one coffee and ground coffee.

The department said the SB tax is the only sin tax whose rate is not currently indexed to inflation. By comparison, alcohol excise taxes increase by 6 percent annually, while tobacco excise taxes rise by 5 percent.

If approved, the proposed tax measures are expected to generate P63.26 billion in revenues in 2027, P70.52 billion in 2028, P78.39 billion in 2029 and P86.95 billion in 2030.

The DOF estimates average annual revenues of P74.7 billion from the proposal.