[Vantage Point] ProGRESS: When tax relief comes with a P40 price tag
The government wants to put more money into Filipinos’ pockets by cutting income taxes, but it also proposes raising the sweetened-beverage levy from P6 to P20 per liter and from P12 to P40 for drinks using high-fructose corn syrup to help recover the lost revenue. If ProGRESS gives with one hand and collects with the other, the real test is not how much taxpayers save on paper, but how much purchasing power remains after they reach the cash register.
My father used to say that the easiest tax to sell is one whose real payer is difficult to see.
I thought about that when I saw one provision in the government’s proposed ProGRESS tax package. The Department of Finance (DOF) wants to raise the excise tax on sweetened beverages from P6 to P20 per liter for drinks using sugar and other covered sweeteners, and from P12 to P40 per liter for those using high-fructose corn syrup.
Both increases amount to 233%. Government would collect more than three times the present excise tax on every taxable liter.
But what makes this interesting is why government needs the money. ProGRESS would increase the personal-income-tax exemption threshold to P350,000 and provide other tax relief. That costs revenue. To compensate, the DOF proposes raising taxes elsewhere, prominently on sweetened beverages.
That is the ProGRESS paradox: government gives you more money in your payslip, then tries to recover part of what it lost when somebody buys a drink.
The question is not whether Filipinos should consume less sugar. There is a legitimate public-health argument for taxing excessive sugar consumption. Neither is the question whether government needs revenue.
The question is simpler: who eventually pays the additional P14 or P28 on every taxable liter?
Behind the bottle inside a sari-sari (neighborhood convenience) store refrigerator is a chain of manufacturers, suppliers, truckers, distributors, wholesalers and retailers. Increase the tax at one end and somebody must absorb it, pass it on, change the product or sell less of it.
We know something about what happens because the Philippines conducted this experiment before.
When TRAIN’s sweetened-beverage tax took effect in 2018, researchers examining its early effects found that prices of taxable beverages increased an average 20.6% in sari-sari stores and 16.6% in supermarkets after only a month. Carbonated-drink prices increased about 21%, while sari-sari-store sales declined roughly 8.7%.
Companies adapted. Coca-Cola obtained regulatory approval to change its sweetener formulation after TRAIN imposed a higher tax on high-fructose corn syrup. Manufacturers can reformulate. Retailers can raise prices. Consumers can switch products. Margins can shrink.
And some of the tax can eventually land where taxes so often land: in the consumer’s shopping basket.
Consider a family buying a two-liter bottle for Sunday lunch. At today’s P6 rate, the statutory excise on a qualifying two-liter drink is P12. At P20, it becomes P40—a P28 difference.
For a product using high-fructose corn syrup, the excise goes from P24 to P80 on two liters—a P56 difference.
This does not mean the shelf price automatically rises P28 or P56. Manufacturers may absorb part of the increase, reformulate or change package sizes. Competitive pressure may prevent full pass-through.
But somebody pays.
That brings me to the income-tax relief. A worker who pays less income tax sees the benefit immediately on his payslip. Suppose it amounts to P1,250 a month. That P1,250 is visible.
Consumption taxes are different. They disappear into hundreds of transactions: a few pesos at the sari-sari store, a higher supermarket bill, a smaller package or a manufacturer changing ingredients.
Nobody sends a household a statement saying: “This is how much of your income-tax saving you returned through higher consumption taxes.”
Yet that is precisely the accounting that matters.
The DOF estimates that ProGRESS would surrender approximately P326.92 billion through tax-relief measures from 2027 through 2030 while its revenue-raising provisions would generate about P518.71 billion.
Government therefore does not merely recover what it gives away. It emerges roughly P191.8 billion ahead.
The sweetened-beverage numbers are more revealing. The measure is projected to raise approximately P296.97 billion from 2027 through 2030, compared with about P300.33 billion government expects to surrender through personal-income-tax restructuring.
The beverage-tax measure alone could therefore recover almost 99 centavos for every peso of revenue surrendered through personal-income-tax relief.
That changes the debate.
The question is no longer simply whether raising the tax-free threshold to P350,000 is generous. It is whether Filipinos genuinely receive tax relief or government is merely moving the collection point from the payslip to the cash register.
And the timing deserves scrutiny.
Household math
DOF’s policy brief puts July inflation at 6.2%, with housing, water, electricity and gas inflation at 8.2%. Second-quarter GDP growth has since slowed to 2.3%, while household consumption growth weakened to 2.8%.
We are contemplating substantially higher consumption taxes when the Filipino consumer is already losing momentum.
This is why I want the DOF to give Congress something more useful than revenue projections.
Show us the household arithmetic. Take Filipinos earning P250,000, P350,000, P500,000, P750,000, and P1 million annually. Calculate their income-tax savings, estimate the additional consumption-tax burden and show us the net gain or loss.
That is the number that determines whether ProGRESS deserves its name.
I am not against taxing sugar. I am not against taxing cigarettes or vaping products. And I certainly support meaningful income-tax relief.
What concerns me is calling something tax relief before demonstrating that the taxpayer actually ends up paying less.
If government puts P1,250 back into my pocket every month through lower income taxes but higher consumption costs take P1,000 away, my tax computation says I am P15,000 richer for the year.
In real life, I am only P3,000 better off.
And if those costs take more than P1,250, I have received tax relief on paper while becoming poorer in the real world.
So before Congress rushes ProGRESS into law, I want government to answer one deceptively simple question:
When P6 becomes P20 and P12 becomes P40, who pays the difference?
Find that person and we will discover who is really paying for ProGRESS. – Rappler.com
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