The Finance Department ordered the Bureau of Internal Revenue to check if beverage manufacturers are paying the correct amount and type of tax under the Tax Reform for Acceleration and Inclusion or Train law.
The department said it issued the order after it uncovered possible discrepancies in their tax payments, which left a P10-billion shortfall in the excise tax collection target in the first 10 months of 2018.
Finance Undersecretary Karl Kendrick Chua said the excise tax collection target on sugar-sweetened beverages as of October 2018 was expected at P40 billion, but the BIRcollected justß around P30 billion, possibly because SSB manufacturers might not be paying the correct taxes.
Finance Secretary Carlos Dominguez III said despite the shortfall, the SSB tax had significantly contributed to the state coffers, bringing in an additional P100 million a day in revenues, or about P3 billion a month.
Around P100 million a day was the operational target set by the DoF for the collection of the SSB tax.
The Train Law 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. Milk and 3-in-1 coffee mixes were exempted from the tax.
“My hunch is that those that are supposed to pay the P12 tax are only paying P6,” Chua said during a recent Finance executive committee meeting.
Citing data from the Department of Health and the Food and Drug Administration, Chua reported to Dominguez that as of October, only one company, Coca-Cola, secured an FDA approval to convert its sweetener from HFCS into sugar or other caloric or non-caloric sweeteners, which is charged a lower tax of P6 per liter.
Other companies that were 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 6 percent, 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 said.
BIR deputy commissioner Arnel Guballa said the agency already started checking the tax payments of beverage manufacturers and sending deficiency assessments to correct the SSB tax discrepancies.
Excise tax collections on SSBs from large taxpayers amounted to P29.74 billion in the first 10 months of 2018, while another P184.4 million was collected from other SSB taxpayers, for a total of P29.92 billion.
Data showed the BIR collected P7.70 billion in SSB excise taxes in the first quarter of 2018, P9.95 billion in the second quarter, P8.64 billion in the third quarter and P3.63 billion in October.