Imposing and raising special consumption tax contributing to change consumption behavior

Regulations on Special Consumption Tax attracted the participation and comments of a large number of experts, businesses and consumers at the conference.

Complete regulations on special consumption tax policy

The draft Law on Special Consumption Tax (SCT) amendments focuses on several key areas: taxable subjects, non-taxable subjects, tax base, tax calculation price, tax rates, tax refunds and deductions, tax reductions, and the timing of SCT determination.

Regarding taxable subjects, the draft Law defines 11 groups of goods and 6 groups of services subject to SCT. Notably, it includes sweetened beverages that meet Vietnamese standards (TCVN) with a sugar content of over 5g/100ml under the SCT taxable subjects. This aligns with the Party and State's policies on protecting public health and the recommendations of health organizations and the Ministry of Health.

Regarding SCT rates, the draft proposes maintaining the 75% tax rate for tobacco products and introducing an absolute tax rate on a roadmap with two options to achieve the goal of reducing the smoking rate among males aged 15 and above to below 39% during the period 2023-2025 and below 36% during the period 2026-2030, and aiming to achieve the WHO's recommended tax-to-retail price ratio for tobacco of 75%.

In terms of alcohol and beer, the draft proposes a progressive percentage tax rate for alcohol and beer over the period from 2026 to 2030 to achieve the goal of increasing the selling price of alcohol and beer by at least 10% in line with the WHO's tax increase recommendation. For sweetened beverages that meet TCVN with a sugar content of over 5g/100ml, the draft proposes a 10% tax rate as this is a new item added to the SCT taxable subjects.

During a workshop discussing the draft Law, some participants proposed exempting sweetened beverages from taxation, arguing that there is insufficient evidence to conclude that sweetened beverages are the main cause of overweight and obesity. However, according to Ms. Truong Tuyet Mai, Deputy Director of the National Institute of Nutrition, the rate of obesity is influenced by many factors, including sweetened beverages. Levying a tax on sweetened beverages will certainly change consumption behavior. Businesses only need to change their technology and reduce the amount of sugar in their products to comply, or they will have to pay taxes. The Ministry of Health is also actively promoting various solutions to change consumption behavior, but taxes are still necessary to increase the selling price of products.

Many challenges from adding taxable items and increasing taxes

According to Associate Professor Dr. Vu Sy Cuong of the Finance Academy, Vietnam's overall tax rates are not considered high compared to other countries. However, as a proportion of total state budget revenue, excise tax has shown a slight downward trend, contributing only 6.5-7% to the overall budget balance.

Dr. Cuong emphasizes the importance of analyzing tax policies from a holistic perspective, considering the market, economic impact (including state budget revenue, businesses, labor, etc.), and the context of implementation. He highlights that in addition to increasing state budget revenue, adjusting excise tax aims to provide additional resources to offset healthcare costs for consumers.

Also, Dr. Cuong supports increasing excise tax for certain goods and services, particularly tobacco, to influence consumption patterns, especially among low-income groups. He suggests applying a mixed tax method to tobacco, as proposed in the draft law, and expanding its application to other goods and services while establishing a framework or ceiling for absolute taxes.

The draft law proposes two options for the excise tax trajectory for alcohol and beer, with a preference for Option 2. Under Option 1, prices in 2026 would increase by approximately 10% compared to 2025, followed by annual increases of 2-3% to ensure that product prices rise in line with inflation and income growth. Option 2 proposes a 20% price increase in 2026 compared to 2025, followed by annual increases of 2-3% to align with inflation and income growth.

Ms. Van Anh, Vice President and General Secretary of the Vietnam Beer, Alcohol and Beverage Association, expressed concerns about the significant impact on the beverage industry since 2020, resulting in declines in various performance indicators such as production, revenue, and profits. She urged the drafting body to consider international experiences, particularly from neighboring countries with similar conditions to Vietnam, such as China and Thailand. Ms. Anh advocated for a balanced approach that combines tax increases with measures to combat counterfeit and substandard products, protecting legitimate businesses, preventing revenue loss, and safeguarding consumer health.

She also requested a delay in the effective date of the amended Law on excise tax to 2027. For alcohol and beer products, the association proposed a more moderate tax increase and a staggered implementation timeline to stabilize the market and allow businesses to adapt.