Vietnam | Proposal to impose taxes based on sugar content on soft drinks

On the morning of November 22, the National Assembly discussed the draft Law on Special Consumption Tax (amended). According to the draft law, the Government proposes to impose a special consumption tax on beverages with a sugar content of over 5 grams per 100ml (soft drinks). The expected tax rate is 10%.

Professor Nguyen Anh Tri, former Director of the Central Institute of Hematology and Blood Transfusion, said that the special consumption tax on sugary drinks of 5 grams/100 ml needs to be looked at deeply and affect health to adjust accordingly. fit. Because according to him, sugary drinks are not completely harmful to health. “I come home from work tired, having a glass of soft drink immediately wakes me up. Not all sugary foods are harmful,” he raised the issue.

Therefore, delegates recognized the need for an appropriate tax level, depending on the sugar content in drinks, to help adjust the habit of consuming sugary foods and increase tax revenue. He proposed having 3 tax levels for alcoholic beverages at a content of 3-5 grams/100 ml; 5-15 grams/100 ml and over 15 grams/100 ml.

Currently, many countries impose special consumption taxes based on the sugar content in soft drinks. For example, Thailand has many tax rates, drinks with a sugar content of 6-8 grams/100 ml are subject to one tax rate; 9-13 grams/100 ml is subject to a different tax rate and above 14 grams/100 ml is subject to a higher tax.

In this aspect, Mr. Nguyen Truc Son, Permanent Vice Chairman of Ben Tre province, also suggested that it is necessary to clearly define what a beverage is, whether it includes fruit juice, vegetables or drinks to quench thirst. Mr. Son cited 200,000 farmers and 100 coconut exporting businesses in Ben Tre who are worried that the lack of a clear concept about this beverage makes them unclear whether processed coconut water products are taxable or not.

“Introducing the same general tax rate as the draft law on freshwater is not appropriate, affecting production, especially the agricultural sector,” Mr. Son said.

According to warnings from the WHO Health Organization, the rate of people suffering from diseases related to overweight and obesity has increased rapidly in recent years. In Vietnam, one in four people aged 15-19 is overweight or obese.

According to Ms. Tran Thi Nhi Ha, Deputy Head of the People’s Committee, a 350 ml bottle of energy drink on the market has 64.5 grams of sugar. While according to the recommendations of the nutritional pyramid, the amount of sugar consumed per day by adults should be less than 25 grams and for children 3-11 years old should be less than 15 grams. “When we drink a bottle of energy drink, we consume twice the amount recommended for health,” she said.

However, regarding the tax rate, Ms. Nhi Ha requested the Government to consider to ensure logical explanation and consensus of businesses and people. She questioned why the ratio of 5 grams/100 ml was chosen and not another ratio. Are beverage products that use natural sugar from fruits subject to this tax? The Government’s impact report has not specifically demonstrated scientific evidence of this proposal.

Previously, the proposal to impose taxes on soft drinks received support from international organizations. Calculations by the Ministry of Finance show that retail prices increase by 5% when soft drinks are subject to a 10% tax rate.

However, the World Health Organization (WHO) noted that this increase is “modest”, with little impact on reducing consumer consumption. They recommended that the Ministry of Finance create a roadmap to increase taxes by 2030 so that the price of soft drink products increases by 20% due to taxes. Similarly, the World Bank (WB) believes that to increase prices by 20%, the applicable tax rate needs to be 40% or an absolute tax of 7,000 VND per liter.

On the contrary, Ms. Duong Minh Anh, Member of the Culture and Education Committee, is concerned that this policy will not increase budget revenue but will have a negative overall impact on the economy. Citing some research, she said that a 10% special consumption tax on this item will help the first year’s revenue increase by about 8,500 billion VND, but the budget from direct taxes will decrease by more than 2,150 billion VND.

In the following years, budget revenue from indirect and direct taxes decreased. This leads to a decrease in added value and profits, thus risking lowering total budget revenue in the following cycles.

Ms. Anh requested the drafting agency to clearly state the basis to prove that the application of special consumption tax policy on sugary beverages with a content of 5 grams/100ml can change consumer behavior and achieve results. effective in reducing the rate of overweight and obese people compared to cakes, candy, apricot fruit…

“Many countries tax sugary drinks, but the rate of overweight and obesity has increased,” Ms. Anh worried, saying that increasing taxes on soft drinks could increase the consumption of informal drinks or hand-made products. labour.

Not to mention, many foreign businesses have now switched to low-sugar beverage products with less than 5 grams of sugar content, but still sweet, and will not be subject to tax. “Imposing special consumption tax on domestic businesses creates inequality with foreign companies. This tax should not be applied to sugary beverages,” Ms. Anh suggested.

According to the program, the National Assembly will discuss in the hall the draft Law on Corporate Income Tax (amended) on November 28.