Crossroads (Toward Philippine economic and social progress)
Philippine Star, 6 November 2019


In the news lately is a Department of Health (DOH) proposal to impose a tax on salty products for public health reasons. The reasoning being put forward is the same as that for tobacco, alcohol and sugared drinks.

The tax proposal is a bad idea. There may be a public health reason against the consumption of high-salt foods. There are, however, far stronger reasons to lay off this category of foods for the sin tax. Consider the fact that the country’s very poor families are dependent on this class of foods for physical survival.

High-salt foods should be excluded from the sin tax. High salt foods are the only foods that the poor consistently can afford to buy within their budget.

 Examples of these include tuyo, tinapa, daing, all kinds of dried fish-preparations that are preserved and often sun-dried with the help of salt. Add to this the sauces – bagoong, toyo, patis, etc. Of course, there are many other high-salt food concoctions like noodles for soup preparations, many kinds of processed canned goods, and some other meat products.

Technically, high-salt foods could be defined for a wider range.

Though there is high salt associated with a lot of food preparations, in general, they represent viands taken with other staples such as rice, corn, cassava or other foods that are much less salty. Therefore, the argument about their bad effects on the health of their consumers could be exaggerated.

The poor consume these products in much larger quantity compared to other groups of the population in relation to their income, which is low.

The average salt intake of these foods by the consumer might be over-stated. Filipinos eat salty foods with their rice, corn and other staples, the latter often in much larger quantities.

It would seem from this that the feared commerce in foods that contain high-salt for human consumption is therefore, over-rated insofar as encouraging high salt consumption.

In the case of tobacco, vapors, alcohol and even highly sweetened drinks –the commodities subject to sin taxes – their use is direct for the involved users. These products bought or used are in more concentrated, or directly, in strong form. Their use lead to the associated hazardous health consequences that public health authorities are decrying.

The public health costs associated with these bad habits are therefore much more immediately threatening and deserving of the sin tax imposition.

Compared to these commodities, salty foods are generally bought for the food plate of those in poverty. Versus consumers and users of sin goods, salty foods are eaten by the members of the family and the larger set within society with low incomes, than is the case for sin goods.

For this reason, it is best to completely exclude them from the sin tax idea. The health authorities and their nutritionist allies may have good medical reasons to keep people away from taking high-salt consumption for their own physical well-being. Public education and advice could help in this approach.

The condition of poverty demands that other economic strategies take high precedence in dealing with the problems of the poor. Thus, the search for tax to solve some public health issues also have their limits.

It is good that Finance Secretary Carlos Dominguez appears to be only studying this proposal from the DOH Rep. Joey Salceda, the chair of the House ways and means committee, has already expressed a negative reaction. Instead, he proposes a “junk food tax.”

This reminds me that more affluent economies have devised a “food tax” on restaurant consumers, quite aside from the usual sales taxes that enter food commerce. However, the VAT tax is an over-all sales tax in our case.

If we can only succeed in reducing the number of zero-rates and exemptions from the VAT (as the Finance department has been proposing), the government’s tax yield could become even more productive to help finance

Salt as a basis for taxation. It is not a bad idea to tax salt like any other commodities in a modern, growing economy. In fact, salt taxation is older than the idea of the nation state

In ancient times, the tax on the sale of salt was widely used. Then, life was simpler and there were few commodities that could be the source of financing the needs of the community. My wikipedia reference says that words such as “salary” are derived from the same root word of salt. This indicates the significance of salt to the history of civilization.

Today, salt is an industrial input, important to food preservation as it is in the manufacture of other important commodities. In the effort to associate it with food, salt has been classified among commodities that affect the poor due to the food budget.

The Duterte administration should direct its efforts to include salt within the broader definition of the tax base. The national tax code exempts salt from VAT taxation.

Note the following treatment of salt in Section 109 (A) of the tax code. This is a consequence of the legal definition of salt or salting in processes of food preparation: “Products shall be considered in their ‘original state’ even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, broiling, roasting, smoking or stripping.  Polished and/or husked rice, corn grits, raw cane sugar and molasses, and ordinary salt, and copra shall be considered in their original state.”

Yet, I can bet my bottom peso that salt is part of the broader tax base as an indirect, transformed commodity.