The reasons for raising taxes imposed on beverages are not convincing

Thu Phuong - Sep 15, 2017 | 09:49 AM GMT+7

TheLEADERIf the Ministry of Finance (MoF)’s draft law, which amends and supplements five tax laws is adopted, it will have serious impacts on beverage producers.

The reasons for raising taxes imposed on beverages are not convincing
Vu Tu Thanh, representative of the US-ASEAN Business Council. Photo: VTVcap

The reasons for raising taxes are not convincing

Previously, the MoF proposed that the VAT imposed on soft drinks will be raised from 10 to 12 per cent, the excise tax imposed on beverage producers will be raised to 10 per cent and the VAT imposed on sugar will be raised from 5 to 6 per cent.

Regarding this issue, at the workshop "Suggestions on the draft law amending and supplementing some articles of five tax laws" organized by the Chamber of Commerce and Industry of Vietnam (VCCI), Vu Tu Thanh, representative of the US-ASEAN Business Council, said that If the MoF’s draft law is adapted, it will have serious impacts on beverage producers.

The prices of beverage products will increase to at least 12 per cent, affecting the sales of products. At the same time, the cost of production will increase due to the increase in VAT imposed on sugar. These will mostly affect the small and medium enterprises, Thanh said.

The bases for imposing the excise tax on soft drinks by the MoF, including tax restructuring to increase the State’s budget, compliance with the international trends and protection of consumers’ health, namely obesity and diabetes are not convincing. There is no scientific basis to prove whether soft drinks are the main cause of diabetes and obesity and the imposition of excise tax on soft drinks will reduce these diseases, Thanh added.

From the same perspective, Ph.D., Associate Professor Nguyen Van Viet, Chairman of the Vietnam Beer Alcohol Beverage Association (VBA) said that the MoF's draft law discriminates between beverages and other Sugar-sweetened and sweet foods. If the MoF is concerned with the customers’ health, especially obesity and diabetes, it is necessary to impose an excise tax on all foods that may cause these diseases. Although there are many foods that contain higher sugar content than soft drinks, excise tax is proposed to be imposed on only soft drinks.

"The MoF's explanation report on the draft law has not answered the questions that how the draft law will affect the economy, the beverage industry and consumers? What benefits the State will receive if the draft law is passed?” Viet added.

Imposition of excise tax is proposed to be postponed.

Thanh said, the draft law includes ambiguous words that can be interpreted in different meanings. Firstly, the concept of "soft drinks” should be clearly defined. "Soft drinks" are defined as sugar-sweetened drinks or all sweet drinks. If the drinks are sweet and sugar-free ones, whether they are harmful to health as described?

Second, if "soft drinks" are defined as sugar-sweetened ones, whether the applicable tax rate will be differently imposed subject to the sugar content?

Third, what "sports drinks", "fruit drinks" and "milk and dairy products" are? What percentage of fruit or milk in fruit drinks or dairy products is eligible for excise tax exemption? Fruit drinks that contain milk are considered as dairy products for tax exemption? The definition of "100 per cent juice" should also be more clearly defined. In fact, there is no 100% juice product that is industrially produced.

Furthermore, Thanh suggested that the MoF should postpone the imposition of excise tax on soft drinks because it will affect the business activities of beverage producers in particular and the revenue of the State’s budget in general.

In this regard, Viet also suggested that in case that excise tax must be imposed on soft drinks, the MoF should consider imposing excise tax on all beverages at a low, from 1 to 3 per cent for example, or on only the soft drinks with high sugar content.

In addition, the "sports drinks" should be omitted from the list of soft drinks imposed with excise tax because the sugar content, minerals and vitamins in sports drinks are necessary to help athletes or sports players supplement water, electrolytes and energy before and after practice or competitions. Therefore, "sports drinks" are not the reason causing obesity and diabetes