Imposing a consumption tax on sugary drinks is appropriate to the current context

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Encourage people to access healthy food by taxing sugary drinks to drive consumption. Photo: H. Anh

Taxing sugary drinks to drive consumption

Regarding the legal basis for bringing this item into the special excise taxable category, the Ministry of Finance said, Decision No. 02/2022/QD-TTg of the Prime Minister approving the National Nutrition Strategy. From 2021 to 2030 and a vision to 2045, tasks and solutions for completing mechanisms and policies on nutrition have been assigned, including: "reviewing, building, supplementing and perfecting legal regulations on nutrition, develop financial policies and mechanisms including the payment of health insurance for nutrition activities in health facilities and schools; develop regulations on nutrition labelling on the front of prepackaged product packages, limit advertising for unhealthy foods, especially for children, and impose an excise tax on sugary drinks"; At the same time, Decision No. 155/2022/QD-TTg of the Prime Minister approving the National Plan for prevention and control of non-communicable diseases and mental health disorders for the period 2022-2025 assigned the Ministry of Finance to "Research and propose appropriate tax rates for sugary beverage products, unhealthy foods and conditional business products to limit the use of unhealthy products".

The Ministry of Finance said that the World Health Organization (WHO) has officially recommended to the governments of countries to take many actions to encourage people to access healthy food through a tax on sugary drinks to guide consumption. As a result, countries have gradually added sugary drinks to the subjects subject to excise tax: in 2012, there were only about 15 countries; by 2021, there will be at least 50 countries collecting excise tax on this item. In ASEAN, 6/10 countries (Thailand, Philippines, Malaysia, Laos, Cambodia, Myanmar) have collected excise tax on sugary drinks, and Indonesia is currently considering applying excise tax on this item.

According to Ms Nguyen Thi Cuc, President of the Vietnam Tax Consultants Association (VTCA), in the past, we have raised the issue of needing to levy an excise tax on these products; however, after considering, we have reconsidered the time to apply for further study. Up to now, public health has changed with the focus on nutrition, which aims to limit foods and drinks that are harmful to health, ensuring health safety. Therefore, the issue of limiting products with negative impacts on health, including sugary drinks, continues to be mentioned.

Emphasizing that excise tax is a tax of its nature for each country at a certain time to regulate at a reasonable level and orient the production and consumption of that product, Ms Nguyen Thi Cuc said that the study The introduction of sugary soft drinks into the subject of excise tax in this project of the excise tax law is in line with the current practical context.

Determine when, how and how to tax appropriately

In this regard, Assoc.Prof.Dr. Dinh Trong Thinh said the Ministry of Finance's proposal to levy an excise tax on sugary drinks is completely reasonable. "Special excise tax on sugary beverage products is one of the effective measures to reduce the consumption of sugary soft drinks, contributing to the prevention and control of non-communicable diseases. If excise tax is applied, output may decline for the first few years but then recover and may continue to increase. Moreover, the excise tax is levied on consumers to regulate consumption behaviour. According to Assoc, " businesses are only payers, so apart from the short-term decline in output, businesses in the industry are less affected by other impacts, "said expert Dinh Trong Thinh. Prof. Dr Dinh Trong Thinh, the important issue is that enterprises producing and trading sugary drinks must prepare plans to adapt to new policies in this field; and the management agency must determine when and how much, as well as how to tax accordingly.

According to Ms Nguyen Thi Cuc, the excise tax policy for sugary drinks must be researched on appropriate, harmonious and consistent tax rates with other relevant tax policies. "Currently, we can apply the tax mechanism as a percentage of the selling price or according to the quantity per 1 can, 1 litre. In addition, it is possible to apply the mixed tax method, which means applying the tax calculation method according to the percentage and the absolute tax method at the same time. For example, 1 litre will have an absolute fixed tax and how much percentage, etc. At the same time, it is possible to choose products with different tax rates according to the degree of impact on health. For example, a product line with a large impact on health will be taxed at a higher tax rate than product lines with a lower level of impact, "said Ms Cuc.

There are many opinions that, in the world, there are a number of different taxing methods, such as tax by percentage, by volume, by content or by threshold of sugar in beverages. Each method has different advantages and disadvantages. Accordingly, the design of tax policy according to the threshold will bring harmonious results, and then the tax policy - as a regulatory tool of the State, will contribute to making the market more balanced. Sugary drink production will not increase or decrease a little. People reduce their consumption of high-sugar beverages and increase their consumption of sugar-free and low-sugar beverages, bringing many health benefits.

According to experts, the issue of regulating consumption depends not only on tax policy but also on other measures (such as regulations on administrative sanctions); It is necessary to propagate and educate people to see the harmful effects of sugary drinks. Accordingly, in addition to tax measures, the State should also carry out other supplementary measures such as regulations on announcing the sugar content in packaging labels, warning the level of sugar with clear information for people to choose, banning advertising and conducting communication campaigns to raise consumer awareness, promote healthy diets, to prevent overweight, obesity and other diseases caused by overusing sugar. Therefore, the combination of other measures and taxation will be highly effective in limiting the consumption of sugary drinks.