Sugar prices rise on increased demand and VAT fears
The DTI warns of further price increases as the BIR plans to impose a VAT on raw and refined sugar

TAXING. There has been much controversy surrounding the BIR plan to tax raw and refined sugar. File photo by Jay Directo/AFP

MANILA, Philippines – The average retail prices of sugar rose on the second week of April due to increased demand and speculation on the impending imposition of value added tax (VAT) on raw and refined sugar.

Monitoring by the Sugar Regulatory Administration (SRA) as of April 10 showed that the average retail price of raw sugar in Metro Manila markets rose by a peso to P44.50 ($0.99) per kilogram from P43.50 ($0.97) as of April 7.

The average retail price of washed sugar as of April 10 was placed at P48.50 ($1.08) per kilogram from P47.50 ($1.06) per kilogram on April 7.

The average retail price of refined sugar, meanwhile, was placed at P51.50 ($1.15) per kilogram from P51.00 ($1.14) per kilogram.

SRA Administrator Ma. Regina Martin said this could be attributed to the increased demand for cold sugary drinks during the summer as well as lower supply since the milling season is about to finish.

An industry source who declined to be identified said some traders may have been increasing their prices by at least P50 ($1.12) per 50 kilogram (kg) bag in preparation for the implementation of advance 12 % VAT on raw and refined sugar in May.

Defining raw sugar

The Bureau of Internal Revenue (BIR) published a new revenue regulation on the last week of March, reiterating that sellers of raw and refined sugar are required to pay in advance the 12 % VAT before the sugar is withdrawn from their warehouses.

SRA Administrator Ma. Regina Martin said the new revenue regulation would be implemented on May 1, with the condition that the payment of the advance VAT should not be shouldered by consumers.

The issuance of the new revenue regulation is despite the SRA petition to postpone the implementation until the next crop year, in September, to avoid confusion and prevent spikes in prices.

The SRA is also challenging the definition of raw sugar in the new revenue regulation, noting that based on a 1989 BIR regulation, raw sugar is free from tax.

The BIR argued in the new regulation that any sugar produced using the centrifugal process is not exempt from VAT.

It maintained that only raw cane sugar or muscovado sugar is exempt from payment of VAT because it is produced without the use of any mechanical device.

A study conducted by the SRA on the implications of the imposition of a 12% advance VAT on raw sugar also shows that this would result in a price increase of around P5 per kilogram at retail.

The Department of Trade and Industry warned consumers of higher sugar prices due to the new VAT regulations.

President Benigno Aquino III recently signed the Sugarcane Industry Development Act of 2015 to help bolster the ailing industry. –

 $1 = P 44.57