What is TRAIN?

Tax Reform for Acceleration and Inclusion

The goal of the first package of the Comprehensive Tax Reform Program (CTRP) or TRAIN is to create a more just, simple, and more effective system of tax collection, as per the constitution, where the rich will have a bigger contribution and the poor will benefit more from the government’s programs and services.

Increasing the Tax of Sugar-Sweetened Beverages

The SSB excise tax will help promote a healthier Philippines. Along with the Department of Health (DOH), DOF supports this as part of a comprehensive health measure aimed to curb the consumption of SSBs and address the worsening number of diabetes and obesity cases in the country, while raising revenue for complementary health programs that address these problems. This is a measure that is meant to encourage consumption of healthier products, to raise public awareness of the harms of SSBs, and to help incentivize the industry to develop healthier products and complements.

Why impose a tax on SSBs?

● Most of the sugar-sweetened beverage, with some notable exceptions provide unnecessary or empty calories with little or no nutrition. SSBs are not a substitute for healthy foods such as fruits and rice.

● SSBs are relatively affordable especially to children and the poor who are the most vulnerable to its negative effects on health.

● SSB products are easily accessible and can be found in almost any store, unlike other sweetened products. Most often, the poor and the children are not aware of their consequences.

Common examples of SSB products include carbonated beverages, sports and energy drinks, and sweetened juice drinks. Under TRAIN, an excise rate of P6 per liter will be taxed on drinks containing caloric or non-caloric sweetener, and P12 per liter on drinks containing high-fructose corn syrup. 3-in-1 coffee and milk are exempt from this tax.

Consumption of SSBs, mostly softdrinks, is significantly linked to high incidences of overweight, obesity, and diabetes worldwide, including in low and middle-income countries. The National Nutrition Survey (2003-2015) indicates an increasing trend of overweight or obese Filipinos through the years and across age groups, especially among the poor.

In addition, habitual consumption of SSB is associated with greater incidence of Type 2 diabetes.2 According to the International Diabetes Foundation, there are around 3.5 million cases of diabetes in the Philippines. In 2015, government reimbursements on hemodialysis totaled to about P7.4 billion covering 1.1 million patients. This is considerably high spending for PhilHealth especially on benefit payout for diseases that are preventable with evidence-based and recommended public policy interventions. In total, around P300 billion is spent annually by diabetic patients on maintenance medicine and operations. The government needs sufficient revenues to fund diabetes treatment as inaction will worsen these problems.

The SSB excise tax, as a health measure, will encourage individuals and families to make healthy choices to ensure a healthier and more productive population. To complement the SSB excise tax, there are also non-tax measures organized around the Health in All Policies approach. This strategy is envisioned to include regulatory measures on marketing, mandatory labeling, information and advocacy measures for health promotion, and improved nutrition literacy among Filipinos.

1 Basu, S., Yoffe, P., Hills, N., and RH. Lustig (2013). The relationship of sugar to population-level diabetes prevalence: An econometric analysis of repeated cross-sectional data. PLOS ONE 8(2): e57873 https://doi.org/10.1371/journal.pone.0057873

2 Imamura, F., O’Connor, L., Ye, Z., Mursu, J., Hayashino, Y., Bhupathiraju, S., and N. Forouhi (2015). Consumption of sugar sweetened beverages, artificially sweetened beverages, and fruit juice and incidence of type 2 diabetes: systematic review, meta-analysis, and estimation of population attributable fraction. BMJ 2015; 351 :h3576.