Higher sugar tax threatens beverage output

Beverage manufacturers could face pressure to cut production, raise prices, or reduce their use of locally sourced sugar as the government pushes a sharp increase in sweetened beverage taxes.

In a statement on Tuesday, the Philippine Sugar Millers Association (PSMA) warned that the proposed increase in excise tax from P6 to P20 per liter could trigger a 27.2-percent decline in beverage sales volumes in 2027, based on government projections cited by the group.

The proposed 233-percent increase, alongside a five-percent annual adjustment, forms part of the Department of Finance's (DOF) Promoting Growth, Revenue, and Equity towards Socio-Economic Sustainability (ProGRESS) Bill.

PSMA said weaker beverage sales could translate into fewer sugar purchases, further depressing domestic prices as farmers and millers struggle with declining production, rising costs and weak demand.

“The proposed SSB tax increase presents a troubling contradiction in government policy. The government is encouraging sugar farmers to continue cultivating sugarcane and has recently extended emergency assistance, or ayuda, to farmers struggling to recover from severe RSSI infestation.

Yet the DOF is proposing a tax measure that could further weaken demand for the very sugar these farmers produce,” PSMA Executive Director Jesus Barrera said.

The industry has been grappling with declining sugarcane tonnage and output due to Red Striped Sugarcane Infestation (RSSI) and extreme El Niño conditions.

PSMA also questioned the proposed income-tax relief under the bill, arguing that poor sugar farmers, particularly agrarian reform beneficiaries, could bear the economic burden of higher beverage taxes without benefiting from the proposed higher income-tax exemption threshold.

The group urged the DOF to reconsider the measure, warning that weaker demand could further undermine the recovery of the domestic sugar industry.

Earlier, the Beverage Industry Association of the Philippines (BIAP) warned that the proposed 233-percent increase in sweetened beverage taxes could drive up consumer prices and squeeze sales at around 1.3 million sari-sari stores nationwide.

The group urged the government to defer the measure amid rising food and fuel costs, warning that weaker beverage demand could hurt small retailers and low-income consumers.

“We have to be very, very clear in what we want to achieve, on the health front and on the revenue front. We recognize there’s a problem, we need to be part of the solution, and we’re staying to be part of it,” BIAP President Juan Lorenzo Tañada said.