Marcos Jr. admin's health binge? Junk food tax and higher levies on sodas

MANILA, Philippines — The Marcos Jr. administration is coming after sweet and salty treats, proposing a tax on junk foods and increasing the taxes on sodas and sweetened beverages, but an analyst opined the proposal could turn regressive.

Finance Secretary Benjamin Diokno said in a Viber message to reporters that his department and the Department of Health are pursuing this initiative in a bid to “tackle diabetes, obesity, and non-communicable diseases related to poor diet.”

“The incremental revenues from this tax package will fund important socio-economic programs initiated by the Marcos administration, such as the Department of Social Welfare and Development's food stamp program. This program will provide support to 1 million food-poor households, to alleviate food insecurity and malnutrition,” Diokno said. 

For context, economic managers already floated this plan in April but details were scarce then. If realized, the Philippines joins a list of nations around the world that sought to widen their revenue base by imposing a tax on the public’s affection for junk food. 

In this proposal, the DOF said they would impose a P10 per 100 grams tax on pre-packaged foods that contained no nutritional value. 

This ranged from confectioneries, snacks, desserts, and frozen treats, which the DOF said breached the health department’s thresholds for fat, salt, and sugar content. 

That said, the proposal also sought to inject more taxes into the sweetened beverage tax rate under the TRAIN law to P12 per liter. This would sidestep any type of sweeteners used to manufacture it.

The DOF noted that this proposal on the soda tax will be indexed yearly by 4%, eliminating exemptions to widen the tax base. 

The Duterte administration indicated in 2022 that the soda tax enables the state to raise P105 million daily as a result of this measure. 

That said, the DOF said that this new tax package will generate an additional P76 billion in its first year of implementation.

The state projected it could curb the public’s consumption of junk food by 21%. To this end, Leonardo Lanzona, an economist at Ateneo De Manila University lauded the measure but warned of possible swings in demand for these products. 

“These products may have a very high price elasticity especially if targeted to the middle-income groups. This means that demand may likely fall, except for the very rich.  It is unlikely than for the needed tax revenues for important socially oriented programs may be achieved,” he said. 

Lanzona explained that the state should instead train its sights on wealth taxes to reduce inequality and fund socio-economic programs.

“The government should not rely on these forms of taxes as these can also be regressive as lower-income and middle-income groups are the heaviest consumers of these products,” he added. — Ramon Royandoyan