Find a balanced solution and a reasonable roadmap.

High taxes don't necessarily mean more revenue for the government.

The Special Consumption Tax Law has a very broad impact, affecting all businesses involved in the production, import, and trading of goods and services subject to special consumption tax. Therefore, there have been numerous workshops recently to gather opinions on this draft law.

Regarding the content of the draft law, the points that have received much disagreement are the changes to the tax calculation method, adjustments to tax rates, and the addition of certain items to the special consumption tax category, which will affect Vietnamese branded products and reduce their competitiveness with similar products bearing foreign brands.

Scientific workshop "Contributing opinions to the draft Law on Special Consumption Tax (amended)". Photo: Ha Linh.

Commenting on the draft amendment law, Associate Professor Dr. Nguyen Van Viet – Chairman of the Vietnam Beer, Wine and Beverage Association (VBA) stated: “The reform of tax policy needs scientific and practical research and calculations in Vietnam to ensure: suitability to the actual conditions of production and business in the industry in Vietnam; transparency, a clear and simple roadmap, and feasibility; and a balance of interests: the State: regulating consumption, increasing budget revenue and fostering sustainable revenue sources; businesses: avoiding significant impact and creating stability; and consumers: protecting their health.”

For example, the draft proposes increasing the excise tax on alcoholic beverages to raise their prices by at least 10%, as recommended by the World Health Organization (WHO), with a tax increase schedule based on income growth and inflation. This is not an appropriate time to raise taxes.

The draft also proposes two methods for calculating taxes on alcoholic beverages. The first method, currently in use, is a relative tax, applying a percentage-based tax rate. A second method is proposed: an absolute tax method and a mixed method (applying both percentage-based and absolute tax rates simultaneously). The Ministry of Finance maintains the current relative tax method. However, some opinions support the second method.

"If tax rates are increased or the tax calculation method is changed, businesses in the industry will be severely affected," Mr. Viet stated.

Regarding the taxable items, Mr. Viet suggested that "until there is sufficient convincing scientific basis and a full impact assessment on expanding the items subject to excise tax, it is suggested that consideration be given to not adding sugary soft drinks, barley drinks, and non-alcoholic beverages to the list of items subject to excise tax."

At the seminar, senior expert on Taxation and Corporate Governance, Mr. Nguyen Van Phung, emphasized that after two years of the Covid-19 pandemic, businesses and the economy are facing numerous difficulties due to the ongoing global economic crisis and recession.

"During this difficult period, in addition to the goals of regulating consumption and establishing and stabilizing the state budget, policies and laws on excise tax need to play a role as a tool to support businesses in overcoming difficulties and gradually recovering production and business to create long-term sustainable development," Mr. Phung stated.

A thorough and in-depth study of both supply and demand is needed.

Having previously served as Director of the Department of Large Enterprise Tax Management (General Department of Taxation) and former Deputy Director of the Tax Policy Department (Ministry of Finance), Mr. Phung supports the Ministry of Finance's stance of maintaining the current method of calculating taxes on alcoholic beverages.

According to Mr. Phung, changing the tax calculation method without a thorough impact assessment would affect the production and business capabilities of Vietnamese branded beer companies and reduce the competitiveness of Vietnamese branded beer compared to foreign brands. At the same time, it would indirectly have a significant impact on state budget revenue and the budget balance of localities, as Vietnamese branded beer is produced in local breweries throughout the country.

Given the current circumstances in Vietnam, it is not yet the right time to apply either a mixed or absolute approach, neither in terms of state revenue collection nor tax administration costs.

Sharing the same viewpoint as Mr. Phung, and also supporting the tax calculation method for alcoholic beverages chosen by the Ministry of Finance, is Dr. Vo Tri Thanh – Director of the Institute for Strategic Brand and Competition Research. He was formerly the Deputy Director of the Central Institute for Economic Management.

Dr. Vo Tri Thanh argues that every type of tax and every method of tax calculation has its advantages and disadvantages, and that high taxes do not necessarily benefit the budget. If taxes are too high and negatively impact production and business, then budget revenue will also be affected.

Thanh's perspective is that the government's policy is to find a balanced solution for the supply and demand of alcoholic beverages to ensure: economic efficiency (in terms of resource allocation and competition); social efficiency (meeting necessary and healthy needs while minimizing negative impacts); and budget revenue (a certain benefit for the state). However, this is a complex and not simple task, with multiple perspectives and noteworthy policy implications.

“This is also a valuable time to support businesses in restructuring production and enhancing competitiveness. Therefore, thorough and in-depth research into supply and demand, market segments, and the socio-economic conditions of Vietnam is necessary, especially in the process of achieving the country's development goals by 2030 and 2045, and various scenarios for applying relative, mixed, and absolute tax methods,” Mr. Thanh said.

Dr. Vo Tri Thanh believes that the excise tax rate on alcoholic beverages, especially beer, should not be adjusted until 2025. The excise tax rate could increase by approximately 5-10% in 2026. Consideration should be given to applying a mixed excise tax method to alcoholic beverages around 2030, when Vietnam becomes a high-middle-income country. Initially, a tiered absolute tax rate system could be applied depending on whether the product is mainstream or premium, along with adjustments to the relative tax rate.

Ha Linh

Source: https://www.congluan.vn/sua-luat-thue-tieu-thu-dac-biet-tim-giai-phap-can-bang-va-lo-trinh-hop-ly-post255200.html