Vietnam should delay excise tax imposition on sugary drinks: experts

As Vietnam is amending the excise tax law, Prof. Nguyen Mai, chairman of the Vietnam’s Association of Foreign Invested Enterprises (VAFIE), suggested authorities not levy the tax on sugary drinks.

He made the statement at a Friday workshop on excise tax in Hanoi, organized by VAFIE - the parent entity of The Investor. The event focused on the Ministry of Finance’s suggestion to impose a 10% excise tax on sugary drinks.

In case the National Assembly, Vietnam’s highest legislative body, insists on passing the law with tax on sugary drinks, the tax should be phased out for businesses to adapt to the situation, Mai added.

In the first two years of the new amended law (2026-2027), sugary drinks should not be subject to excise tax. In the next three years (2028-2030), the excise tax should be 5% for all sugary drinks, regardless of their sugar ingredients. From 2031, a blanket excise tax of 10% is recommended.

While consumption is a key economic driving force, excise tax means to curb consumption and can hurt the country’s growth, Mai noted.

Besides, he backs higher tax against cigarettes and alcoholic drinks for health reasons.

Dr. Nguyen Duc Kien, former head of the Prime Minister’s economic advisory group, said it is inevitable that the National Assembly will pass the amended excise tax law.

"Businesses should now focus on adapting to the regulations, instead of suggesting no excise tax options." He recommended a “delayed” implementation of the tax, starting from 2028 for instance.

Addressing the meeting, Phan Duc Hieu, permanent member of the National Assembly's Economic Committee, said participants at the event shared a common suggestion that excise tax should only curb luxurious products and smuggled goods.

The excise tax should apply against alcoholic drinks and cigarettes, not against sugary drinks, air conditioners, nor pickup trucks, he added.

Le Dai Hai, deputy director of the Ministry of Justice's department of civil and economic laws, said the National Assembly will review and potentially pass 12 laws and one resolution, including the revised Law on Excise Tax, during its ninth working session in May 2025.

Hai highlighted the urgency of the law, additing that it is unlikely its passage will be delayed. However, he pointed out a policy conflict: while the government seeks to ease difficulties for businesses due to recent global economic downturns and the severe impact of the Covid-19 pandemic, it is also pushing for amendments to the Law on Excise Tax.

A more balanced solution, he suggested, could be delaying the law's enforcement date, providing state agencies and enforcers more time to prepare. He proposed that, if approved, the law should take effect on January 1, 2027.

Independent criticism of the Law on Excise Tax needed

Lawyer Truong Thanh Duc from the Vietnam Lawyers Association argued that the current draft revised Law on Excise Tax expands the existing tax frameworks and fills gaps left by other taxes.

“The goal of this law is to limit and discourage consumption. However, in the current economic climate, we should focus on stimulating consumption to drive economic growth,” he told the workshop.

Duc warned that the draft law undermines a key national objective. In the past, the government decided on consumption and distribution, but today, consumption is primarily governed by supply and demand.

He stressed that while taxes are necessary for the state budget, the excise tax should not overlap with other taxes, nor should it be used to restrict consumption.

Duc agreed that the excise tax could be applied to products like tobacco to protect public health, but the tax on sugary drinks should be revisited and justified with clear evidence.

“The excise tax could be applied to luxury items such as airplanes and yachts, but taxing vehicles worth a few hundred million Vietnamese dong (VND100 million = $3,920) should be reconsidered,” he added.

Nguyen Van Phuc, former Vice Chairman of the National Assembly’s Economic Committee, now the Economic and Financial Committee, agreed that the goal of tax laws is to meet or exceed revenue targets. “However, the excise tax law primarily focuses on revenue generation,” he said.

Given the ongoing debate over the draft law, including the taxation of sugary drinks, Phuc suggested that the Economic and Financial Committee hold a session to clarify the draft and invite independent experts to discuss with the Ministry of Finance and the Ministry of Health.

Phan Thanh Thuy from the legal committee of the Vietnam Chamber of Commerce and Industry (VCCI) expressed concern that the explanations provided by the drafting agency were unconvincing.

She noted that the law’s potential impacts on related sectors like packaging, logistics, and recycling and consumer behavior, including price changes, were not sufficiently detailed.

Thuy also highlighted that industries like beer, alcohol and tobacco, which provide over 1 million jobs, could be adversely affected by the excise tax. Some reports suggest that the tax will reduce workers’ incomes and erode investor confidence, particularly among foreign investors.

In light of these concerns, VCCI recommended that the excise tax not be increased or imposed on any of the items listed in the draft law. They proposed that, if necessary, the tax should be applied no earlier than 2028.

The National Assembly is drafting the amended Excise Tax Law. It is scheduled for approval vote by the legislative body at a working session in May 2025.

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).

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