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Profile and Taxation of the Philippine Fast Food Industry:

Journal Ar ticle Cri tique Report

Article Citation:

Bautista, Elizabeth D. and Monica G. Rempillo.2013.Profile and Taxation of the

Philippine Fast Food Industry.NTRC Tax Research Journal, Vol.XXV5: September-

October 2013, pp.1-16.

I. Statement of the Problem / Issue Discussed

Filipinos love to eat. For this reason, a vast number of entrepreneurs in the

country ventures into food and beverage service business. The most popular and fastest

growing type of food and beverage service in the Philippines is the so-called fast food

business.

The study examines the contribution of fast food industry to the economy as well

as the taxes imposed thereon. It also seeks to identify opportunities for growth and the

challenge that fast food chain owners face to further improve the industry performance.

II. Abstract

The fast food industry is a robust and fast growing business. Its immense

contribution to the countrys economicdevelopment, employment generation, and

tourism cannot be over-emphasized.

In relation to taxes, however, the study reveals that there is a wide discrepancy

between the number of restaurants, cafes and fast food establishments that paid taxes and

the number of BIR-registered food establishments. In particular only one-third of theBIR-registered food establishments paid the income tax, VAT or percentage tax,

whichever is applicable and other taxes. Moreover, the number of BIR-registered food

establishments was scant when compared to the count of Euromonitor international on

the number of food service establishments in the country which means that many are

escaping the ambit of taxation. Moreover, the study reveals that there are food

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establishments that are consistently included in the Top 1,000 Corporation and yet not

among the Top Taxpayers of BIR.

In terms of taxes paid, the study likewise shows that despite the continuous

increase in gross revenue and net income and high gross profit margins, the effective tax

rates (ETRs) of some fast food establishments remained low. In particular the ETR

ranged from 0.9% to 3.8% even if they belong to the same line of business. This only

implies that some fast food establishments were able to evade taxes and may therefore be

flagged for audit by the BIR.

Lastly, there is a worldwide awareness and concern on the bad effect of eating

fast food to the body. While personal responsibility for maintaining a healthy and active

lifestyle is important, the government and the consumer industries must also held to

account for the significant role they need to play in balancing the promotion and the

development of fast food industry without compromising the health of the citizenry.

III. A. Body

This article is a review of the profile and taxation of Philippine Fast Food

Industry. The authors purpose in writing the article is to inform the readers about the

contribution of Philippine fast food industry to the economy as well as the taxes imposed

thereon. The author used statistical approaches to show the growth and changes in the

Philippine fast Food Industry throughout the years.

It was discussed in the article that the food industrys contribution to countrys

Gross Domestic Product (GDP) showed positive annual increase but remained less than

2% over the years under average annual share of 1.63%. A report made by Euromonitor

International shows that as of 2010, the total number of food service units in the

Philippines reached 160,263 of which 5,411 were in the fast food sector. Based on NSOdata, the entire food and beverage service activities generated a total employment of

230,914 in 2009.

The author explained the different types of taxes imposed on fast food industry.

The fast food industry, just like any other ordinary businesses, is subject to the following

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taxes under Republic Act 8424 and local taxes under RA7160. These are income taxes,

dividends tax, branch profit remittance tax (BPRT), fringe benefit tax (FBT), improperly

accumulated earnings tax (IAET), value added tax (VAT), percentage tax on Non-VAT

taxpayer, documentary stamp tax, and local taxes.

It was noted that only one-third of the BIR-registered food establishments paid the

income tax, VAT or percentage tax, whichever is applicable and other taxes. Moreover,

the study reveals that there are food establishments that are consistently included in the

Top 1,000 Corporation and yet not among the Top Taxpayers of BIR.

The Philippine Fast Food Industry has its strengths and weaknesses. The author

accounted for that a number of factors and strategies, both external and internal to the fast

food industry, are contributing to its continuing growth. The demand side drivers of the

fast food industry, such as growing population, economic growth, fast changing lifestyle,

among others, push the fast food sector to bigger opportunities for greater heights.

Although the fast food industry is robust as well as fast developing, it is not

without problems and challenges. Economic downturn, increasing commodity prices, stiff

competition, and customers move to healthier lifestyles are some of the threats facing the

industry today.

The author recommended that as part of a worldwide awareness and concern on

the bad effect of eating fast food to the body, the government and the consumer industries

must also held to account for the significant role they need to play in balancing the

promotion and the development of fast food industry without compromising the health of

the citizenry. The Department of Health and the Food and Drug Administration should

strictly monitor/regulate the quality of food that the fast food stores are producing and

make sure that these are safe for human consumption. The government may also explore

the possibility of imposing a fat tax or health tax on fast food similar to the tax being

charged on other European countries. The revenue that shall be collected there from may

be exclusively used for the provision of healthcare services.

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B. Conclusions and Implications

The article was fluent and easy to read. The author effectively presented

information about the profile and taxation of Philippine fast food industry. The report was

factual and statistical proofs justified them.

The report can be used in a practical way. It was very timely that most of us

patronize the products and services of the different fast food establishments. It was only

sad to know that despite the high gross profit rate of some food sectors, still there were

some who find ways to evade there taxes. The BIR can use these data in intensifying

their campaign against tax evaders.

I agree with the author that the government and the consumer industries must also

held to account for the significant role they need to play in balancing the promotion and

the development of fast food industry without compromising the health of the citizenry.

I am interested on the recommendation of the author about the possibility of

imposing a fat tax or health tax on fast food. I think this would help in generating

more funds for the government as well as ensuring the health of consumers.

IV. Overall Assessment

I find the article very informative and timely. This report gives us more ideas

about the profile and taxation of Philippine fast food industry. It makes us more aware of

the performance of different food establishments and their contributions to our economy.

It helps us to understand the different types of taxes imposed on fast food industry. It

encourages us to be more watchful of the different food businesses that are not paying

their taxes correctly.

Finally, I recommend this article to be read by everyone to broaden their

understanding about the Philippine fast food industry.