Excise tax on soft drinks imminent
Excise tax on soft drinks imminent
Despite feedback from experts and businesses over the past year, it is likely that the special consumption tax rate on soft drinks stays at 10% in the latest draft of the revised law on the tax.
The tax imposition is expected to lead to higher product prices and a potential drop in consumption. It may also lead to the creation of alternative products to evade laws and meet consumption needs.
Another reason for the tax is budget revenue shortfalls. The increasing consumption of sugary drinks could bring in considerable revenue for the budget, though the results of taxation may not be as good as expected.
According to a report by the Central Institute of Economic Management (CIEM) on the tax impact, if a special consumption tax rate of 10% is introduced on soft drinks and value-added tax remains unchanged, the gross domestic product will decline by 0.115% and income from production for the entire economy will drop by 0.14%.
The draft law will also affect 9,000 small- and medium-d enterprises in the fields of materials, packaging and transport.
With the new tax, tax collections may contribute an additional VND1.975 trillion to the State budget instead of the VND4.550 trillion estimated by the law drafting body, the CIEM report claimed.
Tax expert Chung Thanh Tien was quoted by Nguoi Lao Dong as saying that the Ministry of Finance has not assessed the potential negative impact on the economy of taxing soft drinks.
It is necessary to review the impact on product prices and the collection of income tax, value-added tax and other taxes, he added.
According to Tien, the expansion of items subject to the tax should be done cautiously to avoid affecting businesses as well as the economy. The optimal solution is to enhance the quality of tax collections.
Besides this, the Government should consider the new tax carefully to avoid creating obstacles for foreign firms, hindering foreign investment attraction and potentially attracting lawsuits in world markets.
