CIEM proposes not to apply special consumption tax on sugary soft drinks

The imposition of special consumption tax (SCT) not only affects the beverage industry, but also affects 24 other industries in inter-industry relations.

On October 17, the Central Institute for Economic Management (CIEM) held a workshop to announce the research report "Assessing the economic impact of the draft special consumption tax (SCT) on sugary soft drinks", attracting the participation of industry experts, economic experts...

Sharing at the workshop, Dr. Nguyen Minh Thao, Head of the Department of Business Environment and Competitiveness (CIEM) informed that the Ministry of Finance is presiding over the drafting of the Law on Special Consumption Tax (amended) with the adjustment of some important contents. In particular, the newly added policy content in the draft is "Expanding the tax base" stipulating: "Adding sugary soft drinks according to Vietnamese standards with a sugar content of over 5g/100ml to the subjects subject to Special Consumption Tax". At the same time, the draft proposes to apply a tax rate of 10% because this is a new item.

CIEM đề xuất chưa áp dụng thuế tiêu thụ đặc biệt đối với nước giải khát có đường

Dr. Nguyen Minh Thao, Head of the Department of Business Environment and Competitiveness (CIEM) informed at the Workshop. (Photo: Hong Chau)

However, in the explanation, the drafting agency has not fully assessed the impacts of applying these regulations. There are expert opinions and some scientific analyses showing that the application of special consumption tax as in the draft does not ensure the effectiveness of regulating consumer behavior; at the same time, it does not ensure the principle of fairness of tax policy. On the other hand, the drafting agency has not explained the basis for the proposal to apply a special consumption tax rate of 10% to sugary soft drinks.

Ms. Thao emphasized that CIEM's report identifies economic impacts based on the structure of Vietnam's economy through the IO table updated in 2022 and available official data. The calculation results show that when applying a 10% special consumption tax on sugary soft drinks, the specific impacts on this industry are as follows: (i) The production scale of soft drink enterprises is narrowed after the tax increase; (ii) The added value (VA) and production value (GO) of the soft drink industry both decrease. Of which, the added value decreases by 0.772%, equivalent to a decrease of VND 5,650 billion.

At the same time, the imposition of special consumption tax not only affects the beverage industry, but also affects 24 other industries in inter-industry relations. This causes the total added value of the economy to decrease by 0.601%; equivalent to VND 55,077 billion. Along with that, it leads to a decrease in GDP by 0.448%, equivalent to a decrease of VND 42,570 billion; depreciation of fixed assets decreased by -0.654% (equivalent to a decrease of VND 7,767 billion); profit decreased by -0.561% (equivalent to a decrease of VND 8,773 billion).

"Therefore, CIEM proposes not to apply special consumption tax on sugary soft drinks, because in recent times, soft drink businesses have been continuously affected by shocks from epidemics and unpredictable fluctuations, causing the resilience of soft drink businesses to decline and their competitiveness to be eroded.

During this period, the Government needs to focus on policies to support business recovery; amend and supplement legal documents in a way that facilitates businesses, instead of issuing regulations that may negatively affect production and business activities," Ms. Thao suggested.

In addition, the CIEM research team also proposed that the drafting agency should organize extensive consultations with subjects affected by the policy; explain clearly, transparently, and publicly the comments. At the same time, the issuance of new regulations or amendments and supplements to regulations and policies should conduct comprehensive and substantive impact assessments, based on scientific basis and convincing evidence.

CIEM recommends that industry associations (specifically the Vietnam Beer - Alcohol - Beverage Association (VBA)) should proactively update and coordinate to provide information and scientific basis to the drafting agency and relevant parties during the process of collecting comments on the draft Law and that associations should also cooperate to exchange and share concerns; promptly express policy views; reflect on issues, obstacles and difficulties; propose recommendations related to policies and policy implementation, to ensure effective State management, while creating convenience and safety for enterprises' production and business activities.

Ms. Chu Thi Van Anh, Vice President and General Secretary of the Vietnam Beer - Alcohol - Beverage Association (VBA), said that without a full impact assessment, VBA recommends considering not adding sugary soft drinks to the list of subjects subject to special consumption tax in this amendment.

Some businesses added that, if analyzed in depth, the amount of sugar that causes obesity does not come entirely from soft drinks. 5g/100ml cannot be the main cause of obesity. There are many other products on the market with high sugar content such as milk tea, candy, moon cakes... So should we tax them and is it fair?

According to Tran Thi Nhi Ha, Deputy Head of the Petition Committee of the National Assembly Standing Committee, the application of special consumption tax on sugary soft drinks will have a big impact on consumers and businesses. Therefore, there needs to be a basis for scientific assessment, as well as more convincing evidence on whether or not to apply special consumption tax on sugary soft drinks.

"Relevant agencies need to come up with policies that are suitable to Vietnam's conditions. Vietnam's economic situation and public health are important. Currently, there are many opinions on this issue and more specific research is needed," Ms. Ha suggested.

Source: https://baoquocte.vn/ciem-de-xuat-chua-ap-dung-thue-tieu-thu-dac-biet-doi-voi-nuoc-giai-khat-co-duong-290456.html