Incremental excise tax on sugary drinks in the offing

Incremental excise tax on sugary drinks in the offing

The amended Law on Special Consumption Tax, which proposes adding sugary soft drinks to the taxable list, will look to encourage long-term changes that will improve the health of consumers.

Likely to be affected are flavoured drinks, energy drinks, beverages containing coffee and tea, and more, photo Le Toan

Deputy Minister of Finance Cao Anh Tuan said last week at the National Assembly (NA) Standing Committee that the government had carefully balanced opinions when proposing the inclusion of sugary soft drinks in the revised draft Law on Special Consumption Tax (SCT). It is set to be submitted to the NA during its May session.

The Ministry of Finance, which has been drafting and advocating for the amendments for several years, stated that the move aims to boost state budget revenues, reduce sugar-related diseases such as obesity, and align the SCT law with international practices.

The NA’s Economic and Financial Committee has proposed a tax rate of 5 per cent on sugary soft drinks in 2025, increasing to 10 per cent in 2028.

Tuan said that for soft drinks with sugar content above 5g/100ml, the World Health Organization, the United Nations Children’s Fund, and the Ministry of Health (MoH) recommended applying a tax rate of 30-40 per cent as soon as the law comes into effect to contribute to improving the effectiveness of regulating consumption and protecting public health.

“Sugary soft drinks are a new item proposed to be added to the taxable objects. When adding it, the government balanced the opinions and stipulated a tax rate of 10 per cent, a lower level than the recommendation to encourage businesses to produce soft drinks with low sugar content, as well as raise consumer awareness and adjust consumer behaviour to healthier products,” said Tuan.

The drinks include types such as flavoured drinks, energy/sports drinks, beverages containing coffee and tea, herbal drinks, and soft drinks containing fruit juices or processed from cereals.

It will not apply to milk and dairy products, liquid products used for nutritional purposes, pure vegetable and fruit juice, and nectar of fruit, vegetable, or cocoa products.

According to the World Bank, currently around 108 countries and territories apply excise tax on sugary drinks. In the 2016-2024 period alone, almost 50 markets issued an excise tax on sugary drinks as a fiscal policy for health. In the ASEAN region, currently six countries have applied such a tax.

The rate of overweight or obese Vietnamese children has been classed as alarming. Without effective interventions, it is estimated that by 2030, Vietnam will have nearly two million children aged 5-19 who are overweight or obese, according to the MoH.

While imposing a tax on sugary soft drinks is likely to lead to price increases on those with high sugar content, directing consumers to use alternative products, the drafters said it will also encourage businesses to change ingredients and reduce sugar to avoid tax. From there, it will encourage businesses to produce and import products that are better for consumer health.

Meanwhile, the Vietnam Chamber of Commerce and Industry (VCCI) has sent a document to the NA’s Economic and Financial Committee which recommended that sugary soft drinks not be included in the SCT at this time.

“More time is required to research, evaluate comprehensively, and develop more appropriate policies. Being overweight or obese is not only caused by the consumption of sugary drinks but is also influenced by many other factors such as nutritional imbalance, consumption of high-calorie foods, genetics, lack of physical activity, age, and lifestyle habits,” the document said.

The VCCI reported that in the current challenging economic context, adjusting tax policies, especially SCT, needs to be considered carefully.

VIR