Proposed unprecedented increase
Mr. Nguyen Chi Nhan - General Secretary of the Vietnam Tobacco Association said that based on the proposed tax increase level of the draft, the actual operation situation of the Vietnamese tobacco industry, the business environment, current difficulties and challenges ahead, the Association believes that if not careful, many domestic tobacco enterprises are at risk of closing down and going bankrupt.
Because the proposed options in the Draft Law on Special Consumption Tax (amended) have an increase rate that is too high compared to the previous and current periods and is unprecedented (the previous and current periods are applying special consumption tax at a stable increase rate with each adjustment increasing by 5%).
Mr. Nhan said that in fact, the contributions of the Vietnamese tobacco industry to the state budget and poverty reduction in remote areas are quite large. Specifically, in 2024, cigarette manufacturing enterprises contributed to the state budget such as paying special consumption tax at a rate (75%) of over VND 23,500 billion; paying import tax of over VND 1,800 billion; paying the Tobacco Harm Prevention Fund (2%) of over VND 500 billion; contributing to the Environmental Protection Fund (60 VND/pack) of over VND 260 billion.
Notably, the total capital of enterprises in the Association to date is about 18,000 billion VND and the total assets are nearly 40,000 billion VND. 100% of the value of capital and assets belongs to enterprises with 100% capital held by the State.
In addition, it is necessary to thoroughly consider the relationship between the “shock” tax increase and the “shock” increase in smuggled cigarettes, especially referring to the experience of some countries in this issue. Practice of countries has proven that when the excise tax rate increases, it will increase the smuggling of most types of goods.
For cigarettes, this has been proven in many countries, typically Australia, Malaysia, Indonesia, the Philippines and some European countries, with the amount of smuggled cigarettes increasing more than twice, after the "shocking" tax increase.
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Mr. Nguyen Chi Nhan - General Secretary of Vietnam Tobacco Association speaking at the workshop |
According to 3 analytical models of the Institute of Strategy and Financial Policy, if applying special consumption tax according to option 2, by 2030, legal cigarettes will decrease from 30% to 43%, from 30% to 70% of smokers will switch to smuggled cigarettes, leading to a loss of tax revenue from 10.9 trillion to 20.7 trillion VND. Thus, not only will the goal of reducing the rate of smokers not be achieved, but it will also cause a huge loss of tax revenue, while also causing social insecurity and disorder, especially border security, due to the problem of cigarette smuggling.
Therefore, the Association recommends calculating the increase in special consumption tax and the roadmap for increase to be more suitable to the current situation of the tobacco industry; At the same time, ensuring stability in state budget revenue, limiting the sudden increase in smuggled cigarettes.
Specifically, the Association would like to propose considering the option of imposing an absolute special consumption tax of VND2,000/bag in 2026, increasing by VND2,000/bag after 2 years, and by 2030 it will be VND6,000/bag.
Increasing taxes to regulate and limit car use in the city is inappropriate.
Also at the workshop, Mr. Dao Cong Quyet - Head of the Communications Subcommittee of the Vietnam Automobile Manufacturers Association (VAMA) said that currently, customers using double-cabin pickup trucks (pickups) in Hanoi and Ho Chi Minh City account for nearly 30%, while customers in the remaining provinces and cities account for more than 70%.
Therefore, Mr. Quyet said that the goal of the policy of increasing special consumption tax to regulate and limit the use of this vehicle in big cities is not appropriate because it will be unfair to the 70% of consumers who do not use vehicles in big cities.
Not to mention, pickup trucks have already been subject to increased registration fees according to the Ministry of Finance's explanation. If the special consumption tax rate increases further, cargo vehicles will be subject to double taxation.
Notably, Mr. Quyet informed that, according to quantitative analysis and calculations, increasing the special consumption tax rate for pickup trucks will bring many adverse impacts, including reducing state budget revenue (estimated to decrease by VND 7,700 billion in the period 2024-2030), fluctuations in the automobile market (36% decrease in consumption), losses for businesses that have invested in production lines, increasing costs and limiting the ability to buy new vehicles for many consumers.
Therefore, VAMA recommends maintaining the current special consumption tax rate for this type of vehicle. In case of ensuring budget revenue requirements, VAMA suggests that the drafting agency study a suitable roadmap, maintaining the current rate for the first year since the Law is passed and dividing the increase evenly over at least the next 3 years to avoid shocking increases that affect the production and business of enterprises.
This is also the proposal of Ford Vietnam General Director Ruchik Praful Shah. Mr. Ruchik Praful Shah said that in 2024, Ford Vietnam will contribute about 4,700 billion VND to the state budget, and with Hai Phong, Ford Vietnam will also contribute more than 2,500 billion VND to the budget through import-export activities through Hai Phong, not to mention taxes and infrastructure fees. Every year, Ford Vietnam creates more than 5,000 jobs for workers nationwide.
Ford Motor considers Vietnam a potential market and continues to carry out production and business activities according to its investment plan in Vietnam. Therefore, it hopes to continue to receive policy stability so that the business can continue to consolidate resources and increase investment and development in Vietnam.
Therefore, Ford Vietnam would like to request a thorough and careful consideration of the proposal to increase the special consumption tax on pickup trucks, with a suitable roadmap within 3 years from 2027, increasing by 3% each year (instead of increasing by 9% at a time). This will contribute to ensuring budget revenue requirements, while maintaining business resources and jobs for workers.
Source: https://baophapluat.vn/can-lo-trinh-hop-ly-khi-tang-thue-ttdb-tranh-tac-dong-tieu-cuc-post542708.html
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