Tariff hike for sweeteners seen forcing shift to domestic sugar, blunting revenue impact

A GOVERNMENT proposal to raise tariffs on artificial sweeteners is expected to have only a short-term impact on Customs collections, with users eventually shifting to domestic sugar, officials and analysts said.

Customs Commissioner Ariel F. Nepomuceno said the plan to impose a tariff hike on sugar substitutes does not guarantee a boost in the agency’s collections because of the availability of domestically produced alternatives.

“Imposing higher tariffs on artificial sweeteners may not automatically boost customs collections if it becomes cheaper to source and use domestic sugar,” he told BusinessWorld via Viber.

Agriculture Secretary Francisco P. Tiu Laurel, Jr. last week said the government is considering raising the current 5% duty on sugar substitutes to curb surging imports and protect domestic producers.

Mr. Laurel said that he has begun discussions with Finance Secretary Frederick D. Go on the appropriate tariff level, adding that the Department of Finance will come up with a determination on the eventual rate.

The Bureau of Customs (BoC) aims to collect P1.003 trillion this year.

Mr. Go has expressed confidence that the BoC will hit the P1‑trillion mark in 2026, citing reforms and new leadership.

The BoC generated P934.4 billion in revenue last year, missing its P958.7-billion target, after the midyear freeze on rice imports dented its collections.

On the other hand, University of Asia and the Pacific Associate Professor George N. Manzano said beverage and food manufacturers may not be able to switch overnight to domestic sugar and opt instead to keep importing and absorb the higher costs.

”In the short term, government revenue likely goes up. Over the longer term, the effects on sugar and related industries will depend on how big the tariff is and how businesses respond,” he said via Viber.

If artificial sweeteners become costlier, some firms may revert to domestic sugar, bolstering the agriculture, Mr. Manzano said, or spur investors to consider manufacturing sweeteners domestically if tariffs remain high.

“On the other hand, if the tariff is too high, manufacturers might simply import finished products (like drinks or processed food) instead of producing them locally. That could hurt domestic food manufacturers instead of helping them,” he said.

Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, said consumers will ultimately bear the cost of import duties.

“The DA has often resorted to tariffs as the solution to many of their supply side problems. What they fail to consider apart from the raising government revenue is its impact on the consumer,” he said via Messenger chat.

He said the DA should instead invest in facilities and industrial support to help sugar producers compete globally.

The government has imposed a suspension of sugar imports until the end of the year, except for volumes shipped in exchange for exported sugar.

“More importantly, the domestic industry should work on their own to be more productive and not rely on government subsidies and other forms of trade protection,” he said.

Foundation for Economic Freedom President Calixto V. Chikiamco said the measure is unlikely to ease the sugar industry’s structural problems.

“Banning artificial sweeteners, which the market may demand, may reduce the demand for finished products or shift the demand toward imported finished products using artificial sweeteners,” he said via Viber.

The industry is also contending with a global shift away from sugar, increasingly viewed as unhealthy, Mr. Chikiamco said.

“Local sugar prices are already double the world market price, putting our downstream industries using sugar such as beverages, confectionaries, baked goods at competitive disadvantage,” he added. — Aubrey Rose A. Inosante