Gov’t to audit beverage makers’ tax payments after collection shortfall

MANILA, Philippines — The Department of Finance on Thursday blamed sugary beverage manufacturers who “might not be paying the correct taxes” for the P10-billion shortfall in the government’s excise tax collection.

The excise levies on sugar-sweetened drinks is one of the provisions under the Tax Reform for Acceleration and Inclusion Act that seeks to offset projected foregone revenues from personal income tax cuts.

TRAIN, which took effect in January last year, mandates a P6-per-liter excise tax on beverages using caloric and non-caloric sweeteners and P12 per liter on beverages using high-fructose corn syrup, or HFCS. Milk and 3-in-1 coffee mixes are exempted from this tax. 

According to DOF Undersecretary Karl Kendrick Chua, the excise tax collection target on sugary drinks as of October 2018 was set at P40 billion, but the Bureau of Internal Revenue has so far collected only around P30 billion.

“My hunch is that those that are supposed to pay the P12 tax are only paying P6,” Chua was quoted as saying in a DOF statement.

Citing data from the Department of Health and the Food and Drug Administration, Chua reported that as of October, only one company — Coca-Cola — has secured 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 P6, 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,” he added.

DOF data showed excise tax collections on sugar-sweetened beverages from large taxpayers amounted to P29.74 billion for the first 10 months of 2018, while another P184.4 million was collected from the rest of sugary drink manufacturers, for a total of P29.92 billion. 

The Finance department said the BIR has started checking the tax payments of beverage manufacturers and sending deficiency assessments to correct the “discrepancies.” — Ian Nicolas Cigaral

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