The Philippine sugar industry could face further economic
pressure if the Department of Finance (DOF) proceeds with a proposed increase
in the excise tax on sugar-sweetened beverages, as local producers continue to
contend with declining output, higher production costs and weakened demand.
The Philippine Sugar Millers Association, Inc. (PSMA) has
called on the DOF to reconsider the measure, warning that a sharp increase in
beverage taxes could reduce industrial demand for locally produced sugar and
deepen the difficulties confronting farmers and millers.
Under the proposed Promoting Growth, Revenue and Equity
toward Socio-Economic Sustainability (ProGRESS) Bill, the excise tax on
sugar-sweetened beverages would rise to ₱20 per liter from the current ₱6 per
liter. The government intends to use the measure to help offset proposed tax
relief for middle-income earners and small businesses.
However, the PSMA argues that the policy could impose
additional costs on an agricultural sector already struggling to recover from
production setbacks.
Local sugar producers have been affected by the red-striped
soft scale insect (RSSI) infestation and El Niño, which have contributed to
declining sugarcane tonnage and lower sugar production. These challenges have
compounded rising operating expenses and weak market demand.
PSMA Executive Director Jesus Barrera said the proposed
increase could undermine the government's efforts to support sugar farmers.
Authorities have encouraged continued sugarcane cultivation and extended
emergency assistance to farmers affected by severe RSSI infestations. A tax
increase that weakens demand for sugar, the group argues, could work against
those recovery efforts.
The association also questioned whether the proposed
income-tax relief would adequately benefit the sector's most vulnerable
workers. Barrera pointed out that poor and marginalized sugar farmers,
including thousands of agrarian reform beneficiaries, could face indirect
economic consequences from the beverage tax increase without receiving
comparable gains from the proposed tax cuts.
Beverage Manufacturers Could Reduce Sugar Purchases
The PSMA warned that beverage manufacturers, among the major
buyers of locally produced sugar, could respond to higher excise taxes by
cutting production, increasing retail prices or reducing the sugar content of
their products.
Each response could have consequences for domestic sugar
demand. Higher prices may discourage consumers from purchasing sweetened
beverages, while product reformulation could reduce the volume of sugar
required by manufacturers. If beverage sales decline, companies may also scale
back their purchases from local suppliers.
For sugar farmers, the effects could extend beyond lower
sales volumes. Reduced industrial demand could place additional downward
pressure on farmgate prices, further squeezing incomes already affected by
lower harvests and rising production costs.
The issue illustrates how a tax designed to generate
government revenue can have consequences across an entire supply chain.
Beverage manufacturers may adjust their production decisions, but farmers and
millers could ultimately absorb part of the economic impact through reduced
demand and weaker selling prices.
The PSMA is therefore urging the DOF to reconsider the proposed increase, citing the need to align tax policy with the government's agricultural recovery and farmer-support programs. The outcome could have significant implications for local sugar producers, particularly if the industry continues to face production constraints while demand from major commercial buyers weakens.
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