Many opinions say that applying special consumption tax on sugary soft drinks does not increase budget revenue but has a negative overall impact on the economy.
Applying special consumption tax to sugary drinks is one of the contents of interest in the Draft Law on Special Consumption Tax (amended) which is being consulted by the Ministry of Finance and on November 27, the National Assembly also discussed it in the Hall with many conflicting opinions.
It can be seen that after many workshops to contribute comments on the Draft Law on Special Consumption Tax on alcohol, beer, and soft drinks, the draft Law on Special Consumption Tax (amended) submitted to the National Assembly has almost no changes compared to the previous draft. Particularly for sugary soft drinks, according to the draft, soft drinks according to Vietnamese standards with a sugar content of over 5g/100ml are subject to a tax rate of 10% because this is a new item added to the list of subjects subject to special consumption tax.
In fact, from the purpose of regulating income, guiding production and consumption, special consumption tax is an important tool to help the State regulate the economy and create a large source of revenue for the state budget. In addition, the purpose of excise tax also to limit the use of discouraged items such as: Tobacco, alcohol, sugary drinks, use of gasoline, oil, etc.
From that practice, the Ministry of Finance The proposal to impose an excise tax on sugary drinks to control obesity and infectious diseases may be considered a reasonable proposal, but it is not easy.
The imposition of tax on this item is still of interest to National Assembly deputies, experts, and businesses. Many opinions and recommendations are not to include it in the list of products subject to the 10% special consumption tax. This is because there is not enough scientific basis to prove that the imposition of special consumption tax on sugary soft drinks is effective in controlling the rate of overweight and obesity, creating inequality between product lines.
In this regard, from an international perspective, there are now more than 100 countries that tax sugary drinks to prevent overweight and related diseases. For example, Mexico, one of the countries with the highest consumption of sugary drinks in the world and also the country with the highest obesity rate, has imposed a tax of 1 Peso (nearly 500 VND) on 1 liter of sugary drinks since 2014. This tax has caused the price of sugary drinks to increase by about 11% and reduced consumption by 37%.
Or in the UK, since April 2018, there has been a two-tier tax on sugary drinks. If a drink contains 5-8 grams of sugar per 100 ml, it will be subject to a tax of 0.18 pounds (nearly 6,000 VND) per liter. Meanwhile, in Thailand, this country has imposed a tax on sugary drinks since September 2017. If a drink contains more than 14 grams of sugar per 100 ml, it will be subject to a tax of up to 5 baht per liter (about 3,500 VND per liter).
However, in reality, not all countries have been successful in imposing excise taxes on sugary drinks. In addition, in countries such as Thailand, India, Norway, Finland, and Mexico, the rate of overweight and obesity continues to increase, despite the decrease in consumption of sugary drinks. Meanwhile, in other countries such as Japan, Singapore, and China, which do not apply this tax policy, the rate of overweight and obesity is well controlled.
Even in Denmark, after applying the above tax policy, it caused many serious consequences, because when the tax was applied, Danes went to other markets to buy soft drinks at lower prices. On the other hand, this tax caused Denmark to lose 5,000 jobs. Therefore, the Danish government abolished the tax on sugary drinks.
So, the question is, if a tax policy is applied to sugary drinks, will Vietnam face similar consequences? Meanwhile, this proposal is considered a "shock" to the beverage industry, slowing down the recovery and growth of the industry and its supporting industries.
It is worth mentioning that, legally, from 2003 to now, the Law on Special Consumption Tax has been amended 5 times (in 2003, 2005, 2008, 2014 and 2016). However, many lawyers believe that the more the Law on Special Consumption Tax is amended... the more confusing it becomes, causing instability in the legal, institutional and business environment, negatively impacting businesses as well as the economy.
One of the problems that many opinions have raised, if this tax policy is applied, is that it creates unfairness when focusing only on ready-to-drink bottled drinks, while drinks mixed on the spot are hardly mentioned. Accordingly, the goal of increasing the tax is to limit consumers from using sugary soft drinks, but it can increase the use of informally produced drinks or handmade products.
In addition, many foreign enterprises have switched to low-sugar beverage products with a content of less than 5g but still have sweetness, so they will not be subject to tax. Thus, if the special consumption tax is imposed on domestic enterprises, it will invisibly create inequality between domestic enterprises and foreign enterprises. It will even create "loopholes" for tax evasion and tax avoidance.
According to the report assessing the economic impact of special consumption tax on sugary soft drinks recently conducted by the Central Institute for Economic Management, if a special consumption tax rate of 10% is applied to soft drinks, the budget revenue from the second year onwards will decrease by about VND4,978 billion each year from indirect taxes, not to mention the corresponding decrease from direct taxes.
In addition, this tax policy will not only directly impact the beverage industry but also impact 25 industries in the economy and lead to a decrease in GDP of nearly 0.5% of GDP, equivalent to VND 42,570 billion.
Currently, the draft continues to be consulted by the Ministry of Finance and will be approved at the 9th session in May 2025. However, it is thought that the Drafting Committee needs to carefully assess the impact, implementation measures, as well as a suitable roadmap for the special consumption tax policy on sugary soft drinks, ensuring feasibility and fairness, while supporting the development of domestic enterprises.
Therefore, the addition and application of special consumption tax on sugary drinks needs to be carefully considered, comprehensively evaluated, linked with international experiences, as well as priorities in policy management so that the policy is close to reality and implementation.
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