Businesses argue that sugary drinks are not related to obesity, so they recommend not including them in the excise tax when amending the law.

The Ministry of Finance plans to impose an excise tax on sugary, malt, and non-alcoholic drinks. The reason is that these drinks cause obesity, and the tax is meant to adjust people’s consumption behavior.

Speaking at the consultation workshop on the proposal to revise the Special Consumption Tax Law on March 15, Assoc. Prof. Dr. Nguyen Thi Lam, former Deputy Director of the Nutrition Institute, cited data showing that obesity is associated with an imbalance between energy intake and expenditure, with little or no physical activity.

According to her, obesity has many causes, such as lack of exercise, consumption of foods high in fat and protein, fast food, and street food that contains sugar. “Fat in food causes more obesity than drinking soda. There is no link between sugary drinks and obesity,” said Lam.

Denmark is one of the countries that has taxed sugary drinks since 1930 but had to abandon it in 2014 because it did not achieve the desired effect.

Mr. Chris Vanloon, Chairman of the American Chamber of Commerce (AmCham) in Da Nang, also expressed concern if a special consumption tax is applied to these products. He said there is currently no definition of “sugary drinks,” so based on the Ministry of Finance’s proposal, it could be taxed on other nutritional products such as milk, milk products, special foods for children and women, or sports drinks.

Mr. Do Thai Vuong, Head of the Beverage Association, stated that the beverage industry is recovering after the pandemic but is facing many difficulties due to instability in the world situation and rising production costs. Beverage businesses need a stable policy environment for taxes and fees to return to the growth phase before the pandemic.

He added that if taxing sugary drinks does not solve the problem of obesity but creates a discriminatory tax policy, it will have adverse effects on related industries such as the sugar cane industry, retail, and packaging.

Representatives of Heineken Vietnam also believe that the Ministry of Finance’s move to exempt non-alcoholic malt drinks from the tax is unreasonable. According to him, the similarity in ingredients, processes, forms, and flavors is not a legal basis for imposing a special consumption tax. It is also not suitable for this tax, which is to restrict or discourage the consumption of harmful products to health,” said a representative of Heineken.

With these concerns, businesses suggest that the amendment of the Special Consumption Tax Law should not be carried out at this time, and sugary drinks, malt drinks, and non-alcoholic beverages should not be taxed. This is for the management agencies to have more time to analyze and evaluate comprehensively, and to develop a suitable tax schedule, avoiding negative impacts on consumers and businesses.

However, Mr. Dinh Trong Thinh, a specialist from the Academy of Finance, has a different perspective, saying that the tax should be levied to adjust consumption behavior. The tax rate could be 10%, as Cambodia is applying, along with nutritional labeling, inspection, supervision, and increased communication for people.

For Vietnam, this is not the first time the Ministry of Finance has proposed to impose a special consumption tax on soft drinks. In 2014, this idea was also put forward with a specific tax rate of 10%, but many ministries and sectors did not agree.

In addition to the plan to tax sugary drinks, the Ministry of Finance is also considering increasing excise taxes on beer and wine. The current tax rate for beer is 65%, while for wine, it is 35-65% depending on the alcohol content below or above 20 degrees. The Ministry believes that consumption and use of these items, especially alcohol, are increasing, so taxes need to be raised to control them.

At the workshop, businesses and experts also proposed postponing this tax increase, at least until 2025. Mr. Nguyen Quoc Viet, Deputy Head of the Policy Research Institute (VEPR), said that the beverage industry is growing but has also fluctuated greatly in the past five years. When impacted, such as by Covid-19, this industry is more vulnerable than other sectors such as food and tobacco.

According to him, policy calculations need to look at the reality of the economy. “If the tax rate is increased at this time, the total budget revenue is not necessarily increased, on the contrary, it may decrease because the tax rate is too high. The overall demand on GDP is decreasing, and increasing taxes will reduce it,” Viet said.

VEPR’s Deputy Head said that in the context of general difficulties in production and business, tax policies with businesses and consumers should be maintained to maintain momentum and stimulate domestic consumption. Any changes need to be studied carefully, ensuring the balance of the state’s interests, businesses, and consumers.

The Deputy Head of VEPR stated that firms should be encouraged to recover and grow rather than taxes being raised.

Building laws should be derived from policies, according to Mr. Pham Tuan Khai, the former head of the legal affairs division of the government office. But, the way building laws are now formulated has flaws because a thorough impact analysis has not been conducted. Mr. Khai stated, “We need to think carefully about it because if we rush into it without a comprehensive effect review, it will harm policies and enterprises.

In addition, tax changes shouldn’t be implemented now, when business conditions are already challenging, according to Professor Vo Tri Thanh, Director of the Branding and Development Research Institute. This will give ample time for thorough research, social impact analysis, and international consultation.

He recommended thin the following phase, the government should think about switching to a mixed tax system (starting in 2026, applying both percentage-based and absolute taxes) as Vietnam’s economy transitions to a high middle-income nation.

Source: VnEpress