Excise tax on sugary drinks: Killing two birds with one stone?

Sugary drink consumption is increasing rapidly.

The seminar "Learning about the harmful effects of sugary drinks on children and adolescents" organized by the Central Committee of the Ho Chi Minh Communist Youth Union in collaboration with Vital Strategies took place on May 16.

At the seminar, Master, Doctor Nguyen Tuan Lam, non-communicable disease prevention expert of the World Health Organization (WHO) in Vietnam, emphasized and gave shocking information: "The consumption of sugary drinks in Vietnam is increasing at a rapid rate."

Mr. Lam provided data that in 2009, the consumption of sugary drinks in Vietnam was at 1.59 billion liters. But by 2023, this number had jumped to 6.67 billion liters, an increase of more than 4 times in just 15 years.

According to Mr. Lam, Vietnamese people are consuming sugar beyond the recommended level, leading to a significant increase in the rate of overweight and obesity in children, adolescents and adults. This is not only a nutritional problem, but also the source of a series of chronic diseases such as diabetes, cardiovascular disease, metabolic disorders...

This finding is consistent with data released by the National Endocrinology Hospital. In 2022, the unit said that over 7% of people in Vietnam had diabetes.

It can be seen that sugary drinks have received great attention from experts because if consumed in large quantities, people will suffer many consequences. That is why, in early May, the draft Law submitted to the National Assembly at the 9th Session proposed to add sugary soft drinks to the list of subjects subject to special consumption tax.

Many National Assembly deputies have suggested that since sugary soft drinks have just been added to the taxable items, there should be a roadmap for implementation so that businesses have time to adapt and adjust their production and business plans.

The National Assembly Standing Committee agrees with the proposal of the Drafting Agency to revise the draft Law in the direction of stipulating the implementation roadmap: From 2027, apply a tax rate of 8%, from 2028, apply a tax rate of 10%.

Sugary drinks have received great attention from experts because if consumed in large quantities, people will suffer many consequences. Illustration photo.

Sugary drink businesses make big profits?

Thus, sugary beverage businesses have a roadmap to pay taxes, not to implement immediately. In fact, the big players in this industry all have abundant financial potential because some units have reached super-profit levels.

Red Bull (Vietnam) Company Limited is one of the most typical names. Red Bull's main product is Red Bull energy drink, an easy-to-drink sugary drink with a reasonable price, just over 10,000 VND/can.

Red Bull has been operating in Vietnam since 1994 with a relatively low charter capital of only VND65.1 billion. However, with annual revenue of up to thousands of billions of VND and after-tax profits of hundreds of billions of VND, the company has accumulated a huge amount of assets.

For example, in 2023, Red Bull recorded VND1,353 billion in revenue and VND461 billion in profit after tax. Thus, the profit after tax/owner's equity ratio is up to 708%. That means 1 dong of equity earns more than 7 dong of net profit. This is a super profit level that not every industry can achieve.

Therefore, starting from only 65.1 billion VND, by the end of 2023, the company had accumulated 2,756 billion VND in equity and 2,958 billion VND in total assets.

Highland Coffee of Cao Nguyen Coffee Service Joint Stock Company is also one of the big names in the sugary beverage industry. The profit margin/owner equity at Highland Coffee is lower than at Red Bull but is still a very high number.

Accordingly, in 2023, with a capital contribution of "only" 151 billion VND, the company earned 4,076 billion VND in revenue and 168 billion VND in profit after tax. That means 1 dong of capital contribution brings the company more than 1.1 dong in profit after tax. Previously, in 2022, this figure even reached 1.8 dong. At the end of 2023, Highland Coffee's total assets reached 1,575 billion VND even though its capital contribution was only 151 billion VND.

With super profits and huge assets accumulated, not to mention product conversion, just in terms of taxes, these two giants are comfortable with money.

Red Bull and Highland Coffee are just a few examples of companies making huge profits in the sugary drinks industry. Many others have followed suit.

Ms. Mai Thanh's weight changed dramatically after 1 year of using sugary drinks. Photo: NVCC

The story of gaining 8kg in 1 year and the wish to "cut back" on sugary drinks

Ms. Mai Thanh (Hai Ba Trung, Hanoi) admits that she has a “fated relationship” with sugary drinks. She shared that in 2023, her relative had to be treated at Viet Duc Hospital. She had to stay in the hospital every day to take care of him.

“I was tired, worried, and mentally stressed, so I turned to sugary drinks. Sometimes it was a cup of milk tea with enough toppings, sometimes a bottle of Red Bull energy drink, etc. Sweets create a false sense of health recovery. Even though I knew that, when I felt more alert after each time I drank something sweet, I drank it every day for 3 months,” Ms. Thanh shared about her process of drinking sweets.

As a result, from a person who weighed only 46, 47kg, after less than a year, she reached 54kg, 55kg, which had never happened before. She said that the time she was heaviest was when she was preparing to give birth. At that time, she weighed 53kg.

“Being fat is worse. But that’s not what I care about. What worries me most is that my health check-up results tend to get worse. First it was grade 1 fatty liver, then grade 2, almost grade 3. Then fatty blood. I feel my health is clearly deteriorating,” Mai Thanh said about her health condition.

Ms. Thanh stated that when choosing a beverage, consumers themselves are the first ones to take responsibility, and should not blame anyone. However, for products that can have negative effects on people, authorities should impose taxes early. That is also a way to warn consumers.

The proposal to impose a tax on sugary soft drinks is the first step in the process of implementing solutions to limit the production and consumption of products containing a lot of sugar.

Hoang Quyen

Source: https://congthuong.vn/thue-tieu-thu-dac-biet-voi-do-uong-co-duong-mui-ten-trung-nhieu-dich-388131.html