Vietnam’s excise tax on sugary drinks can have adverse economic impacts: experts

Vietnamese authorities should carefully consider possible negative impacts of an excise tax on sugary drinks, experts and businesses said on Friday.

They were speaking at a conference hosted in Hanoi by The Investor and Dai Bieu Nhan Dan (The People’s Representative) newspaper.

The conference was organized in the context of the National Assembly, Vietnam’s highest legislative body, set to discuss the draft excise tax law (amended) at its upcoming (eighth) session next month and vote on it at the ninth meeting in May 2025.

In the latest draft, the Ministry of Finance mentions a tax rate of 10%.

Nguyen Duy Hung, a representative of local firm Tan Hiep Phat Beverage Group (THP), said that even during the drafting phase, the excise tax law has negatively affected the firm by generating a bad reputation for sugary drinks as bad for health. He asserted that the firm has never received any health complaints about its products with many consumers being workers “who lack sugar and show no signs of obesity.”

THP now runs 12 production lines within eight factories, 700,000 distribution channels, 4,000 suppliers, and 3,500-4,000 direct staff. No matter how minor, a change can seriously affect the firm’s operation, he said, calling on the drafting team to carefully consider the impacts with detailed reports.

Nguyen Viet Ha, vice chair of the American Chamber of Commerce in Hanoi (AmCham Hanoi), also urged the drafting team to check further the impacts related to changes in consumer behavior, reduction in obesity rate, and fairness in taxing sugar drinks, which are only one of many causes of obesity.

Nguyen Van Phung, former head of the Bureau of Large Enterprises Management under the Ministry of Finance’s General Department of Taxation, said excise tax on sugary drinks would impact not only beverage businesses but also related firms, such as sugar producers, logistics companies, retailers, and packaging firms.

He pointed out that the economic damages from the excise tax, such as lower corporate income tax due to lower sales, would outweigh tax revenues, leading to total economic value going down by at least VND880.4 billion ($35.8 million).

It can also reduce the economy’s gross value added (GVA) by 0.135%, GDP by 0.115%, workers’ incomes by 0.155%, and state budget’s indirect tax revenues by 0.065-0.085%, Phung said.

He urged the drafting team to study more the relationship between sugary drinks and obesity among Vietnamese people, especially kids, with a focus on other nations’ successes and failures in levying the tax.

He said the authorities should carefully reconsider the excise tax as revenue would be minimal while the negative impacts on business would be profound. A possible solution would be to delay implementation to 2030 so as to give firms more time to prepare. He also said the tax is not a perfect tool to solve all issues.

Can Van Luc, chief economist with Hanoi-based bank BIDV, echoed Phung, saying tax alone was not a strong solution. To solve obesity among kids, other options are to improve the awareness of the disease among policymakers and society at large and carry out more research on economic and health impacts of obesity. This is necessary to find more suitable solutions.