Finance ministry proposes special consumption tax on sugary drinks

Vietnam’s Ministry of Finance has again proposed levying special consumption tax on sugary drinks after similar suggestions in 2014 and 2017 were rejected, according to a draft amended Excise Tax Law.

The ministry argued the tax aims to help ensure the health of the people in line with recommendations made by the World Health Organization (WHO), international practices, and Party and Government policies.

It added that sugary drink consumption per capita per year in Vietnam has grown strongly from 6.6 liters in 2002 to 46.5 liters in 2017, and 50.7 liters in 2018. Besides, the consumption of carbonated and carbonated sugary drinks reached 3.3 billion liters and 1.5 billion liters in 2020, respectively.

Special consumption tax on sugary drinks is growing globally, the ministry reported, adding that the number of countries imposing the tax increased from 15 in 2012 to over 50 in 2021, including regional peers Thailand, the Philippines, Malaysia, Laos, Cambodia, and Myanmar.

It also emphasized that the WHO suggested nations promote healthy food by taxing sugary drinks.

The beverage sector is currently the second-biggest contributor to the state budget with about VND50 trillion ($2.1 billion) a year, only after the oil and gas sector, said Nguyen Tien Vy, vice chairman of the Vietnam Beer-Alcohol-Beverage Association. The sector’s revenue could rise to $6 billion in 2025, he added.

In a discussion with local media, economist Ngo Tri Long noted authorities should be cautious in applying such taxes. He quoted researchers as saying that a 10% special consumption tax on sugary drinks could add about VND2 trillion ($84 million) to the state coffers, however, revenue at sugar-related businesses could fall nearly VND4 trillion ($168 million).

Long, former director of the finance ministry's Price and Market Research Institute, suggested such taxes should only be applied to products with extremely high-sugar content, in order to avoid taxing drinks that might not cause obesity.

Vietnam currently applies excise taxes on products, namely tobacco, wine and spirits, beer, under-24 seater vehicles, from 125-cc motorbikes, planes and yachts for civil purposes, fuel, votive papers, playing cards, and air conditioners of below 90,000 BTU.

Services under the tax include dance clubs, massage parlors, karaoke, casinos, reward games, gambling, golf, and lotteries.