Senate clarifies vague definition of raw sugar
Senators made a move clarifying the misunderstood definition of raw sugar and re-exempt the agricultural product again from the value added tax (VAT).
Sen. Serge Osmeña said the upper chamber has approved Senate Bill No. 2987 that will amend Section 109 (A) of the National Internal Revenue Code (NIRC) and provide the standard to be adopted to define “raw sugar” as accepted and recognized by the World Customs Organization (WCO) and the Codex Alimentarius or the Food Code.
Osmeña said clarifying the definition of raw sugar is needed to correct several guidelines issued by the Bureau of Internal Revenue (BIR) “that veered away from the definition of raw sugar or raw cane sugar, and effectively removed the VAT exemption of this vital agricultural product.”
Raw cane sugar has been tax exempt since 1987 under the original, amended and reformed VAT laws.
“The BIR also issued several revenue regulations this year that provided various definitions of raw sugar and raw cane sugar, all with the intention of removing the VAT exemption of this agricultural product which wreaked havoc on the sugar industry,” Osmeña said.
The senator is chair of the Senate subcommittee on ways and means on the VAT Exemption for Raw Sugar.
Senators defined the term “raw sugar” as “sugar whose content of sucrose by weight, in the dry state, corresponds to a polarimeter reading of less than 99.5 degrees,” and the term “raw cane sugar” refers to “partially purified cane juice, without further purification, but which does not preclude centrifugation or drying, and which is characterized by sucrose crystals covered by a film of cane molasses.”
Osmeña said there is a need to remove all the ambiguity surrounding the definition of what is considered as raw sugar or raw cane sugar for purposes of the VAT exemption.
“It would be for the best interest of our entire economy if a single criterion be adopted in defining the basic commodity. This will make our law at par with international standards (because) raw cane sugar cannot be different in this country as in the rest of the world,” he stressed.
Besides, “VAT exemptions have been granted by Congress, and even recognized by the Supreme Court, to the agricultural sector precisely to encourage agricultural production, and to prevent the rise in cost of basic food and other essential provisions for the sake of the general public,” he added.
The BIR regulations imposing VAT on raw sugar or raw cane sugar has drastically decreased the net incomes of small sugar farmers, or those who have only 5 hectares of land and below and which comprise 76% of the total sugar farmers in the country.
BIR’s policy changes on raw sugar, likewise, affected about 700,000 individuals who are engaged in sugar production.
The senator said the government can recover the estimated P1.4-billion in foregone revenues if raw sugar is re-exempted from the VAT.
Osmeña said lawmakers believe the BIR will not lose nor will the government coffers suffer if raw sugar is exempted from VAT.
“In fact, the grant of this tax exemption will create a multiplier effect that will ultimately redound to the benefit of our country and our people,” he emphasized.
The Senate has requested the House of Representatives for a bicameral conference committee meeting to thresh out the disagreeing provisions of SBN-2987 and its counterpart bill, House Bill No. 5713. (By: Angel Ong)