Imposition of a 10 per cent excise tax on soft drinks
Many ministries affirmed that there is no convincing evidence that soft drinks including carbonated, non-carbonated, energy-boosting, sporty drinks cause weight gain, obesity and have adverse impacts on human health.
The ministries also requested MoF to conduct a study on the influences of MoF’s proposal on the beverage industry, the State’s budget revenue and other factors such as labor, raw materials supply, especially materials for tea, coffee and sugar production because tax increase will affect remarkably businesses investing in these sectors.
In response to these objections, MoF stated: "The World Health Organization (WHO) recommends that sugar-sweetened beverages have bad impacts on human health (WHO has implemented many studies on such beverages). There are currently about 40 countries levying excise tax on soft drinks, according to WHO.”
WHO’s letter sent to MoF indicates WHO’s consent to MoF’s proposal to levy excise tax on soft drinks to increase the price of these soft drinks.
Therefore, MoF keeps its proposal to impose a 10 per cent excise tax on soft drinks including carbonated, non-carbonated, energy-boosting, sporty drinks except 100 per cent natural fruit juice and milk from 2019. This aims to orient consumption of soft drinks to protect human health.
Increase of excise tax on cigarettes and cigars
Regarding MoF’s proposal to raise excise tax on tobacco, the Vietnam Tobacco Association and the Vietnam National Tobacco Corporation (VINATABA) have requested no excise tax increase as the domestic tobacco industry is currently subject to strict policies on tobacco prevention such as health warnings, subject to high tax rates, etc.
Therefore, raising excise tax will lead to difficulties in tobacco production and business operation and the increase of smuggling.
MoF replied that WHO, the Viet Nam Tobacco Control Fund (VNTCF) and the Vietnam Public Health Association advised increasing the absolute tax rate on tobacco pack from VND1,000 (US$0.04) per pack to VND 2,000 (US$0.08) per pack.
Furthermore, these organizations also proposed to raise annual inflation rate with the purposes of preventing tobacco use among adolescents and implementing the National Strategy on Tobacco Control to 2020 approved by the Prime Minister.
In addition, there is a proposal to increase the absolute tax rate on one cigar up to VND50,000 (US$2.2) since the lowest price of cigars is about VND500,000 (US$22,1).
In this regard, according to MoF, cigars are high-class products that have prices much higher than those of common cigarettes. The price of one cigar is at least VND300,000 (US$13.2) higher than one cigarette. As a result, MoF proposed the absolute tax rate on one cigar at VND10,000 (US$0.4).
MoF also recommends that a 20-cigarette pack will be subject to the absolute tax rate of VND1,000 (US$0.04) in order to meet the goal of reducing the smoking rate by 8 per cent in accordance with the aforementioned National Strategy.