The Ministry of Finance wants to levy a special consumption tax on soft drinks02/03/2023
In addition to increasing the excise tax on beer, wine and tobacco, the Ministry of Finance once again proposed to put soft drinks into taxable status.
Tax changes for beer, alcohol, tobacco and soft drinks are part of the draft revised Law on Special Consumption Tax, which is being consulted by the Ministry of Finance.
With sugary drinks (soft drinks), the Ministry of Finance proposes to pay excise tax “at an appropriate rate”. This is explained to protect people’s health according to the recommendations of WHO, as well as the policy of the Party and Government and in accordance with international practices.
The agency cited data showing that the consumption of soft drinks in Vietnam has increased sharply, sevenfold in 15 years, from an average of 6.6 liters per person in 2002 to 46.5 liters per person in 2017 and 50.7 liters/person in 2018. Consumption of sugary drinks is still increasing. In 2020, the output of carbonated drinks and soft drinks in Vietnam will reach about 3.3 billion liters and 1.5 billion liters.
Another data cited is according to the results of the nutrition survey for the period 2000-2010 and 2010-2020 of the National Institute of Nutrition. The prevalence of overweight and obesity among Vietnamese children has increased rapidly in all ages and regions, urban as well as rural.
Countries have gradually imposed excise taxes on sugary drinks. According to the ministry, in 2012 only about 15 countries, by 2021 there will be at least 50 countries collecting the above tax. In the region, there are 6 countries including Thailand, Philippines, Malaysia, Laos, Cambodia and Myanmar that impose special consumption tax on soft drinks.
“WHO recommends that governments take many actions to encourage people to access healthy food, through tax measures on sugary drinks to guide consumption,” the Ministry of Finance stated.
This is not the first time the Ministry of Finance wants to impose a special consumption tax on soft drinks. In 2014, this idea was also launched with a specific tax rate of 10%, but many ministries and branches disagreed. The Ministry of Planning & Investment and the Ministry of Justice assessed that the tax argument was not really convincing at that time, while the Ministry of Industry and Trade worried about negative impacts on business prospects.
With beer, wine, tobacco, special consumption tax has increased over the years according to the roadmap. From 2016 to 2018, this tax on alcohol 20 degrees or more and beer increased from 55% to 65%. Cigarettes and cigars are subject to a special consumption tax of 75% from 2019, an increase of 5% over the previous 3 years.
But the use of these items in Vietnam, according to the Ministry of Finance, is still high and increasing rapidly. The survey data of the Ministry of Health in 2020 shows that the smoking rate among men is still high (42.3%), not reaching the target of less than 37%.
Similarly, Vietnam is the largest beer consumer in Southeast Asia, the third in Asia. In 2019, the average beer consumption per person is about 47.6 liters, 1.2 times higher than in 2015; spirits and white wine is 3.4 liters.
Therefore, the Ministry of Finance believes that the use of beer, alcohol and tobacco should be further controlled and proposed to increase the excise tax according to the roadmap.
The ministry also assessed that the tax on alcohol and beer in Vietnam is still low compared to the world. According to calculations by the World Health Organization (WHO), the new tax accounts for about 30% of the retail price, while in many countries, the tax rate accounts for 40-85% of the retail price. With tobacco, this rate in Vietnam is over 35%, while that of Thailand 70%, Singapore 69%, Malaysia 57%, Indonesia 51%, and in developed countries such as Australia 62%, Germany 75%, France 80%.
The increase in excise tax must also ensure an increase in the prices of alcohol, beer and tobacco after adjusting to keep pace with income growth and inflation. This agency explained that the purchasing power of wine and beer of Vietnamese people increased sharply due to the rapid increase in income while the price of wine and beer increased very slowly.
“If in 1998, to buy 10 liters of Hanoi Vodka, domestic wine and white wine had to spend respectively 8.2%, 5.9% and 1.6% of GDP/person. By 2014, this rate was decreased to 2.2%, 1.6% and 0.4%”, the ministry cited.