Which items are subject to excise tax?

The Ministry of Finance will study to add excise tax on products that are not beneficial to health and the environment.

One of the important contents of the revised Law on Special Consumption Tax (SCT) is to expand the tax base according to the guidelines of the Party and State and in line with international practices.

Specifically, the Ministry of Finance will add excise tax on products that are not beneficial to health, the environment and services with limited use according to the guidelines of the Party and State such as sugary drinks; barley and non-alcoholic beverages; new cigarettes and equipment, parts and solutions of new cigarettes; the online business of video game services, etc.

The reason why the Ministry of Finance made this proposal is that for sugary drinks, the World Health Organization (WHO) has officially recommended governments of countries to take many actions to encourage people to have access to healthy foods through a tax on sugary drinks that can orientate consumption.

Countries have gradually added sugary drinks to the items subject to excise tax. Specifically, in 2012, there were only about 15 countries, but by 2021 at least 50 countries have collected excise tax on this item. In ASEAN, 6 of 10 countries have collected excise tax on sugary drinks.

For barley drinks and non-alcoholic beverages, the Ministry of Finance said that in fact, there has been an import of non-alcoholic beverages produced according to the same production process and materials as beer (after the fermentation process, alcohol is separated from the product and natural flavors are added).

Products without alcohol should not be identified as beer according to the provisions of the Law on Prevention and Control of harmful effects of Alcoholic beverages; the products meet TCVN 12828:2019 on beverage, so the enterprise declares the name and product standard as a barley drink. Therefore, they are not subject to excise tax under the current Law on Special consumption tax.

However, currently, a number of countries such as Thailand and India are studying to impose an excise tax on beer with an alcohol content between 14% and 22%. In Oman, beer with zero alcohol content is subject to 50% excise tax from October 1, 2020 after the country had policies to expand the object of excise tax on malted and non-alcohol beer products.

Barley drink products have the same production process and ingredients as beer, the appearance of the product is similar to beer, still has the same characteristic taste as beer, just different in name, and the price is approximately the same. So they can be considered as a product that is similar to non-alcoholic beer. The Ministry of Finance believes that it is necessary to clearly define this time to orientate consumption.

Notably, in the revised Law on Special consumption tax, the Ministry of Finance also proposed to impose an excise tax on new tobacco products and new tobacco equipment, parts and solutions. According to the Ministry of Finance, a number of new tobacco products have appeared on the market today, such as e-cigarettes, heated cigarettes, all-used shisha, and part or no tobacco materials. Although these products are not yet allowed to be imported and traded in Vietnam.

Pursuant to WHO, the Ministry of Health and health protection organizations, e-cigarettes, heated cigarettes and shisha all contain toxic ingredients that are as harmful to smokers and people around as traditional cigarettes. Smoking e-cigarettes, heated cigarettes, and shisa is a form of tobacco consumption. Therefore, based on Article 6 of the Framework Convention on Tobacco Control (FCTC), WHO has recommended that countries ban e-cigarettes or take measures to control e-cigarettes, limit heated tobacco and shisha. In case there are measures to control e-cigarettes, heated cigarettes and shisha, it is recommended to apply the same tax policy as ordinary cigarettes to ensure an increase in selling price and reduce demand for use to protect community health.

According to the Ministry of Finance, for e-cigarettes, there are 71 countries collecting excise tax. Of these, 23 countries apply absolute taxes, seven countries apply percentage taxes, and the rest are countries that apply a mixture of both absolute and percentage taxes at the same rates. Overall, these countries impose taxes on e-cigarettes at the same level as traditional cigarettes. There are 61 countries that collect excise tax on heated tobacco at the same rate as traditional cigarettes.

In addition, online video game (online games) is a form of entertainment associated with the development of the internet, with interaction among players and between players and the server of the service providers through electronic devices such as personal computers, game consoles, and mobile devices. The current type of game business is a product with great revenue and high profit compared to other types of businesses, attracting all ages of the population, especially young people to participate.

Therefore, it is essential to do additional research on the subjects to be applied excise tax to direct consumption.