In Vietnam, Alcohol, Tobacco and Soft Drinks might face an increase in excise tax as the government aims to tackle the budget deficit while at the same time improve community health.
This is part of the country’s comprehensive tax reform strategy for 2030 and it has requested feedback from various ministries, localities, and businesses on the proposal to amend the current excise tax law.
Alcoholic beverages are currently subject to an excise tax rate of 65%, after several revisions since 2015. According to the Ministry of Finance, the consumption of alcohol in Vietnam is still high and increasing, so the excise tax increases were not strong enough to affect consumption.
Alcohol ranks 5th in the 15 leading health risk factors in Vietnam, and is also a major contributor to traffic accidents, injuries, domestic violence and mental health issues.
Over the past 15 years, excise duty on the alcoholic drink industry has been adjusted 5 times. The tax increased from 50% in 2015 to 55% in 2016, and then rose to 65% in 2018. The taxable price also changed from the import price to the wholesale price.
The government is currently studying on new method of taxation and its impact on both public and private sector, as well as look at policies in other countries before reviewing it further. According to several sources, the increase in excise tax could be somewhere in the region of 10%.
Meanwhile, the ministry is also looking into imposition of tax for soft drinks so as to reduce the consumption of sugar-based beverages from carbonated to non-carbonated soft drinks as well as on energy drinks, sports drinks and bottled tea and coffee. The imposition of tax on sugar-laden drinks has already been adopted by many countries in Southeast Asia.
However, this is not the first time that the idea on imposing tax on soft drink has been raised. In 2014, it was proposed but did not get approved due to resistance from many ministries. As many countries in this region have already imposed such taxes, the idea is revisited again with more confidence.
Nevertheless, the higher levy might face strong resistance from drink producers. A recent workshop was conducted and all the producers and business associations that attended the event argued that their products do not contribute directly to obesity in the country. Not only that, they also requested for the delay in the increase, as the economy has just recovered from the pandemic.
