Consumption tax to be studied carefully

HANOI: According to experts, the impact of special consumption tax imposition or increases on various products needs to be carefully studied to ensure consistent state revenue and promote business development. Dau Anh Tuan, Deputy General-Secretary of the Vietnam Chamber of Commerce and Industry (VCCI), stated that the Finance Ministry has proposed amendments to the law on special consumption tax.

The proposal highlights the expansion of the base for the special consumption tax, which aims to impose excise taxes on products and services including sugary soft drinks, barley beverages, new tobacco products, and online games. Tuan noted that there are mixed opinions surrounding the proposal, particularly on the taxation of sugary beverages. The Finance Ministry justifies the move as a means to protect public health and combat obesity.

Nguyen Minh Thao, head of the Business Environment and Competitiveness Research Department at the Central Institute for Economic Management, emphasized the need for a comprehensive study on the impact of levying a special consumption tax on sugary beverages. Thao raised concerns regarding the feasibility of the policy’s objectives, such as promoting public health and generating revenue for the budget, especially considering the current challenges faced by businesses.

The beverage industry currently has approximately 1,800 production establishments, providing employment to around 300,000 individuals. Thao pointed out that the imposition of a special consumption tax on this industry could result in negative consequences, such as higher prices and reduced consumer demand, leading to a decrease in budget contributions.

Furthermore, Thao warned that a 10% special consumption tax rate on sugary drinks would negatively impact output, gross domestic product, worker income, and the national budget. It is estimated that this tax rate would generate additional revenue of around Vietnamese dong 2.28 trillion (RM450mil), but would also lead to a decrease of Vietnamese dong 3.16 trillion (RM623.7mil) for the beverage and sugar industries. The repercussions would extend to thousands of workers in the industry’s value chains, approximately 9,000 small and medium enterprises, and one million business households.

Nguyen Van Viet, chairman of the Alcohol Beer Beverage Association, suggested that inappropriate tax reforms would significantly hinder enterprise recovery and growth targets, particularly during these challenging economic times. Vu Tu Thanh, Deputy Director of the US–ASEAN Business Council, revealed that 45 countries worldwide impose special consumption taxes on sugary drinks. However, experiences in some countries have shown that these policies are not as effective as intended in preventing obesity.

For example, in Chile, obesity rates for men and women were 19.2% and 30.7% respectively in 2009 and 2010. Following the implementation of a special consumption tax on soft drinks in 2014, the obesity rates increased to 30.3% and 38.4% respectively in 2016 and 2017. Nguyen Thi Lam, former Deputy Director of the National Institute of Nutrition, emphasized that obesity is caused by various factors, such as unhealthy nutrition and a lack of exercise.

Lam stated that soft drinks represent only a small percentage of total calorie intake from food and beverages, accounting for an average of 1.1%. The Asean Food Security and Nutrition Report in 2021 reveals that sugary foods and sweets in general constitute approximately 3.6% of the total energy intake from food and beverages. The majority of energy-rich sources are cereals (51.4%), meat (15.5%), and other foods (11.5%), including vegetables and fruits (6.9%). Therefore, Lam argues that the imposition of an excise tax on sugary beverages would not effectively address the issue of weight gain and obesity, as many food items in the market contain sugar and calories.

Tran Ngoc Trung, head of the legal department of the American Chamber of Commerce, highlighted that sugar is a special commodity benefiting from protective policies such as quotas, anti-dumping measures, and subsidy policies. Consequently, taxing sugary products would conflict with the government’s goal of promoting the growth of the sugar industry. — Viet Nam News/ANN