Special consumption tax on sugary drinks not suitable: business associations

Applying a special consumption tax (SCT) on sugary drinks is not suitable, EuroCham, AmCham, and the Vietnam Beer-Alcohol-Beverage Association (VBA) have said in response to a draft amended law.

The Ministry of Finance has again proposed levying SCT 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.

At the Vietnam Business Forum (VBF) on Sunday, EuroCham noted the term "sugared drinks" is a very broad and ambiguous concept, which can be understood as all sugary and drinkable products.

"The term not only overlaps with the group of "non-alcoholic beverages" in the draft, but also includes healthy products such as milk and nutritional products for kids, and nutritious goods for elderly people and pregnant women, among others," Gabor Fluit, newly-elected chairman of EuroCham Vietnam, said in his presentation at the event.

Fluit also argued that the June 2018 report of the Independent High-level Commission of the WHO on Non-Communicable Diseases (including obesity) only recommends to tax alcohol, tobacco, improving reasonable diet and increasing exercise, while there is no recommendation to tax sugared products.

Gregory Testerman, chairman of AmCham Vietnam in Ho Chi Minh City, told the forum that international experience indicates that an SCT on sugary beverages has not proved effective in reducing obesity and diabetes, while it caused significant social and economic impacts.

"Given the availability of many high-calorized foods in the market and the lack of physical activity among school age children, sugar sweetened beverages are not the main cause of obesity," he said.

"Meanwhile, the tax would hurt the beverage industry, which has already suffered from the Covid-19 pandemic and is struggling to recover. In addition, other related sectors such as sugar and sugarcane, retail, packaging, and logistics could be hurt by the tax," Testerman added.

Similarly, the Vietnam Beer-Alcohol-Beverage Association (VBA) said at an event last week that such a tax has yet to prove its effectiveness in reducing obesity and diabetes, giving examples of the tax in Thailand, India, Norway, Finland, and Mexico.

With many other reasons leading to obesity and diabetes, the tax would not help remove the problems and even may cause discrimination in tax policies, the association added.

The VBA proposed no addition of sugared beverages to a list of goods subject to SCT and no changes to the SCT at least in 2023-2024.

The beverage industry is a key part of Vietnam’s economy, with a revenue of VND200 trillion ($8.48 billion) and tax payment of VND60 trillion ($2.54 billion) yearly, said Nguyen Ngoc Bao, vice head of the National Assembly’s Economic Committee, at the VBA’s 2022 conference in February.

EuroCham's recommendations:

- Remove “sugared drinks” from the draft to avoid overlap and confusion. Replace the word "non-alcoholic beverage" with the word "sugar sweetened beverage".

- Not use the word "sugared drinks" in documents because there is no definition in the Vietnamese legal system, which is unclear, and does not match with the words used in scientific studies. When citing studies on sugar-sweetened beverages for policy making, it should be translated correctly as "sugar-sweetened beverages" with the names of specific product groups (carbonated and non-carbonated beverages/juices and tea/sports-energy drinks, with added sugar) to avoid confusion. Only impose SCT on products that have been proven by scientific evidence to be harmful to health in order to be in line with the tax's objectives.

- No SCT on healthy nutritional products such as milk and milk products (with main ingredients from milk), nutritional products for children up to 36 months old, medical nutrition products, special dietary foods (for the elderly, pregnant women), healthy foods, liquid medicines, to be internationally compliant and not harmful to citizen’s health. The Vietnam Food Administration has issued Official Letter 3946/ATTP-KHTC to the Ministry of Finance on December 6, 2019 stating this point of view.

- Food-related policies should ensure consistency within the current system of policies and strategies, including restricting only products that are harmful to health as outlined in Resolution 20-NQ/TW dated October 25, 2017 of the Party Central Committee on enhancement of citizen’s health protection, improvement and care, and encouraging the production of nutritional products, as outlined in the National Strategy on nutrition for the 2021-2030 period with a vision to 2045.

These policies need to be built based on specific and profound scientific evidence, in accordance with the product group that scientific research has shown, not arbitrarily expanded.