Profile and Taxation of the Philippine Fast Food Industry:

J ournal Article Critique 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 economic development, 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 the
BIR-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
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 NSO
data, 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
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.

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.