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.
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3 comments:
The recent economic turmoil has affected many countries and forced their governments to take action against it. I personally think that placing a 10% excise tax on soft drinks may not be the best way to go about it.
I am not a big fan of soft drinks to begin with and an increase in prices would do nothing to help that. The tax is inevitably going to decrease the demand and in turn damage the revenue generated by the soft drink industry. Consequently, in order to accomodate this loss in revenue, companies will likely either fire workers or decrease the quality of the soft drink they serve damaging the economy even more. In the end, while taxes are essential, I believe they constrain businesses from reaching their maximum potential.
Not only are soft drinks unhealthy, but the Philippines government is considering to put taxes on soft drinks. I agree that this will have more negative effects than positive ones on the economy. In my opinion, if the governemnt were introduce an extra tax, they should put it on something that would have minimum alternatives such as furniture. They could have also put the 10% tax on all beverages instead of soft drinks alone. Although the government is hoping that the demand for soft drinks would not alter, I think it will due to two reasons: people need to save all the money they can during this economic crisis and there are just too many substitutions for soft drinks like you said. Overall, the government should think twice before passing this law because they would not want their economy to become even worse.
Calvin
I am not quite sure would it be a positive iea or a negative idea for having an excise tax on pop. Pop to me is an inelastic good, people always want to buy it and won't mind buying an extra bit more for it. An example of this would be the vending machines at community centers. They charge up to $2.25 for a bottle of pop and people still buy them. So if the Philipine government put a 10% excise tax on pop there wouldn't be a huge difference.
But at the same time even though pop is an inelastic good, there are more promotions now on healthy eating and a lot of people are starting to change their habits. So if pop and a healthy drink cost around the same amount and tastes better, people might be more convinced to buy the healthier drink instead.
So inconclusion I am not quite sure whether or not it would be a good idea to have the excise tax or not.
MAO
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