Chapter 3: The Government in a Market Economy

Source:http://www.gmanews.tv/story/134349/Soft-drinks-makers-told-to-bear-impact-of-proposed-10-tax

Summary

In the months of going into recession, many governments in the world are thinking about ways to changing the economy from downfall. There is a main world supplier of soft drinks in Philippines and will experience effects of the recession. The Philippines government hopes to have a 10% excise tax on soft drinks to help the slow recessing economy. With this tax, the government hopes to have more revenue. However, economists and industry officials claim that this proposed excise tax would bring more negative than positive to the economy. Nevertheless, the government believes the price hike of soft drinks would not affect demand since most of the soft drink consumers are wealthy.

Connection

The link between this article and the second chapter of textbook is excise tax. Because the government is suffering the effect of the economic turmoil, they need to think of ways to have more revenue to help sustain the stability. Therefore, government officials thought of this idea of excise taxing on a particular commodity: soft drinks. The proposed excised tax on soft drinks would be a source of revenue for the government. Government officials say this is an act of rationalizing the excise tax on nonessential goods. Filipinos who oppose the tax believe the effect of an excise tax on a market would just move the lower the supply curve since it costs more for the supplier to make. Since the demand would be the same as government officials say, the demand curve is the same.

Reflection

I believe this tax levied on the soft drinks is not a good solution to help turn around the current economic crisis. By taxing the soft drinks, the prices would go up. Consequently, I am sure that there are many other alternatives in drinking other beverages than only soft drinks. There are many other milk and juice beverages; in addition, there is the popular common drink: apple juice. For me, I would buy different alternative beverages if there was a 10% hike on the soft drinks. The Philippine governments claim most of the soft drinks are consumed by the wealthy class. I believe this is not true since we all know that in the western countries, junk food is classified as a lower class meal. Water is more expensive than soft drinks. Overall, I do not think that this excise tax on soft drinks would not affect the economy much.