CIEM proposes not to apply excise tax to sugary drinks.

The imposition of excise tax not only affects the beverage industry, but also impacts 24 other industries in an inter-industry relationship.

On October 17th, the Central Institute for Economic Management Research (CIEM) organized a workshop to announce the research report "Assessing the Economic Impact of the Draft Special Consumption Tax on Sugary Beverages," attracting the participation of industry experts, economists, and others.

Speaking at the seminar, Dr. Nguyen Minh Thao, Head of the Business Environment and Competitiveness Department (CIEM), informed that the Ministry of Finance is leading the drafting of the revised Law on Special Consumption Tax, adjusting several important contents. Among them, the main policy added to the draft is "Expanding the tax base," stipulating: "Adding sugary soft drinks meeting Vietnamese standards with a sugar content exceeding 5g/100ml to the list of goods subject to Special Consumption Tax." Simultaneously, the draft proposes applying a 10% tax rate because this is a new product category.

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

However, in the explanatory notes, the drafting agency has not comprehensively assessed the impacts of applying these regulations. Some expert opinions and scientific analyses suggest that the proposed excise tax does not effectively regulate consumer behavior and fails to ensure the principle of fairness in tax policy. Furthermore, the drafting agency has not provided an explanation for the basis of proposing a 10% excise tax rate on sugary drinks.

Ms. Thao emphasized that the CIEM report identifies economic impacts based on the structure of the Vietnamese economy through the updated 2022 Input-Output (IO) table and available official data. The calculation results show that applying a 10% excise tax on sugary drinks will have the following specific impacts on the industry: (i) The production scale of beverage businesses will shrink after the tax increase; (ii) Both the Value Added (VA) and Gross Output (GO) of the beverage industry will decrease. Specifically, the Value Added will decrease by 0.772%, equivalent to a reduction of VND 5,650 billion.

Simultaneously, the imposition of excise tax not only impacts the beverage industry but also affects 24 other industries in a related inter-industry manner. This causes the total value added of the economy to decrease by 0.601%, equivalent to VND 55,077 billion. Along with this, it leads to a decrease in GDP of 0.448%, equivalent to a decrease of VND 42,570 billion; depreciation of fixed assets decreases by -0.654% (equivalent to a decrease of VND 7,767 billion); and profits decrease by -0.561% (equivalent to a decrease of VND 8,773 billion).

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

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

In addition, the CIEM research team also suggested that the drafting agency should organize extensive consultations with those affected by the policy; provide clear, transparent, and public explanations for feedback. At the same time, the issuance of new regulations or the amendment and supplementation of existing regulations and policies should involve comprehensive and substantive impact assessments based on scientific evidence and compelling proof.

CIEM proposes that industry associations (specifically the Vietnam Beer, Wine and Beverage Association (VBA)) should proactively update and coordinate the provision of information and scientific basis to the drafting agency and relevant parties during the consultation process for the draft Law. Associations should also cooperate in exchanging and sharing concerns; promptly express policy viewpoints; reflect on issues, obstacles, and difficulties; and propose recommendations related to policy and policy implementation to ensure effective state management while facilitating and ensuring the safety of business operations.

According to Tran Thi Nhi Ha, Deputy Head of the People's Petition Committee under the National Assembly Standing Committee, the application of excise tax on sugary drinks will have a significant impact on consumers and businesses. (Photo: Hong Chau)

Ms. Chu Thi Van Anh, Vice President and General Secretary of the Vietnam Beer, Wine and Beverage Association (VBA), stated that, until a full impact assessment is completed, the VBA recommends reconsidering the inclusion of sugary soft drinks in the list of items subject to special consumption tax in this revision.

Some businesses further argue that, upon closer analysis, the sugar content causing obesity doesn't entirely come from soft drinks. 5g/100ml cannot be the primary cause of obesity. Many other products on the market have high sugar content, such as bubble tea, confectionery, and mooncakes. So, should a tax be imposed, and would such a tax be fair?

According to Tran Thi Nhi Ha, Deputy Head of the People's Petition Committee under the National Assembly Standing Committee, applying excise tax to sugary drinks will have a significant impact on consumers and businesses. Therefore, a scientific assessment and more convincing evidence are needed regarding whether or not to impose excise tax on sugary drinks.

"Relevant agencies need to formulate policies that are appropriate to Vietnam's conditions, its economic situation, and public health, which is crucial. Currently, there are many differing 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