Sugaronline Editorial - Risk, or wishful thinking? By Meghan Sapp

Published: 12/08/2017, 12:31:00 AM

The Philippines' sugar tax may fly in the face of WTO rules.

The Philippines' sugar tax may fly in the face of WTO rules


The “war on sugar” is one of those topics that’s difficult to get one’s head around. Some consumers are looking to reduce sugar consumption for what they believe are health reasons. Some governments are looking to tax sugary soft drinks for what they say are concerns for the health of citizens, yet somehow forget about sweets and cakes. One, or both, may be a fad while the latter is most definitely seen as a way to raise revenue for the exchequer.

So it’s no wonder that governments from Mexico to South Africa have dog piled on the idea of this new revenue source that looks like an easy target—if they get the math right, of course. With so much bad news out in the common domain about what researchers say could be links to obesity and diabetes or even dementia, some reports scientifically sound but a lot that likely isn’t, taxing sugar looks like an easy win for policymakers.

But what if it weren’t? What if taxing sugar actually went against the World Trade Organisation’s rules?

Apparently, it depends on how you do it. In the case of the Philippines, the proposal aims to put a higher tax on imported sugar than on domestic sugar, and therein lies the rub. The US-Asean Business Council and Center for Strategic and International Studies said in a statement this week that differentiating domestic versus foreign sugar when it comes to taxes goes against WTO rules.

They argue that the discrimination will not only make the country seen as less attractive for foreign investors compared to other countries in the ASEAN region that are opening their doors to FDI, dressing themselves up in whatever way necessary to bring those dollars in, but that it could force exporting countries to take the issue up with the WTO in Geneva.

What’s interesting, however, is that the complaint seems to be about the differing tax rates where foreign sugar is taxed at twice the level as domestic sugar but no mention is made that High Fructose Corn Syrup—sourced almost entirely from the US and a key reason for falling domestic sugar prices over the past year—would be taxed below domestic sugar. It’s only a peso’s difference between domestic sugar and HFCS but it’s the principle. If the Philippines were really trying to discriminate against foreign imports, wouldn’t they have put HFCS in the same tax band as the one proposed for foreign sugar?

In any case, the policy doesn’t yet look ready to go prime time, with more than 300,000 protesting the tax recently. There is desperate need to look for some coherence across policymaking. Is this about trade or is it about health? Or generating revenue? Hitting two birds with one stone is efficient, but trying to hit three likely will lead to failure.

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