10% excise tax on sugary drinks may wipe 0.5 ppts off Vietnam GDP: expert

A 10% excise tax on sugary drinks could erase 0.5 percentage points from Vietnam’s GDP, according to an expert.

Imposing an excise tax on sugary drinks would impact around 25 other sectors involved in the manufacturing and distribution supply chain of soft drinks, warned Nguyen Minh Thao, head of the Business Environment and Competitiveness Research Department under the Central Institute for Economic Management (CIEM).

He cited CIEM research as saying that an excise tax could deal a blow to 9,000 small- and medium-sized enterprises and one million household businesses involved in the sugary drink industry.

Additionally, Thao mentioned that it is expected to harm the livelihoods of 337,000 sugar cane farming families. Consequently, he noted that payments to the state budget would drop.

Thao went on to say that there is no profound research indicating sugary drinks are the main cause of overweightness. Therefore, it is necessary to take this issue into account to introduce an appropriate excise tax on sugary drinks.

Do Thai Vuong, head of the soft drink division at the Vietnam Beer-Alcohol-Beverage Association (VBA), cautioned that imposing an excise tax would likely impact foreign investment inflows into Vietnam. He emphasized that as investors require stable policies to make informed investment decisions, an excise tax may discourage foreign investors from entering Vietnam.

At a recent session of the National Assembly, Vietnam’s legislature, the draft amended Excise Tax Law was tabled. According to the roadmap, the government will submit the bill to the parliament for comments for the second time at its next gathering in October. It is expected to be adopted by the legislative body at a session in May 2025.

In the draft, the Ministry of Finance proposed soft drinks with sugar content above 5g/100ml be subject to an excise tax of 10%. The aim is to limit the consumption of sugary beverages and prevent and reduce obesity, as recommended by the Ministry of Health, the World Health Organization, and the United Nations Children's Fund (UNICEF).