Soft drink dodges consumption tax

The Government has agreed with the Ministry of Finance's final draft law and not included carbonated soft drinks to the list of items subject to special consumption tax.- Photo songmoi

At July's regular Government meeting, the Finance Ministry submitted to the Government the final draft Law on Special Consumption Tax, in which it asked the Government for approval not to apply the 10 per cent special consumption tax rate as this is in line with the country's integration into the word's economy.

If approved by the National Assembly, the beverage will continue to its current zero per cent tax rate. The Government will submit the revised draft law to National Assembly deputies for discussions this October, and if passed, it would come into effect from July 2015.

In February, the Ministry of Finance released its first draft Law on the Special Consumption Tax that imposed a 10 per cent tax on carbonated soft drinks, citing several studies that pointed out the potentially harmful effects of soft drinks on public health. The ministry said that their consumption should be controlled in the same way as that of cigarettes and alcohol.

However, the Ministry of Planning and Investment dismissed the Finance Ministry's proposal and explanation as unconvincing, casting doubts on the argument about the negative impact of carbonated soft drinks on consumer health.

The Ministry of Industry and Trade also expressed concern that the special consumption tax would hit both foreign and domestic producers of carbonated soft drinks if such a tax was levied.

The proposal had also met with strong objections from foreign business groups and associations in Viet Nam since it made the headlines.

Proposals for the exemption of special consumption tax on naphtha, condensate and other substances used for gasoline blending are expected to go to the table of NA deputies in October when they debate draft supplements and amendments to the Law on Special Consumption Tax.

Under the draft law, cigarettes, cigars, wines and beers at the duty-free areas will still be subject to this tax in a bid by the Government to reduce consumption of these products and to fight trade fraud.

The tax on cigarettes is proposed to be adjusted up from 65 per cent to 75 per cent and 85 per cent from 2018. The suggested tax will rise from 50 per cent to 65 per cent for drinks with an alcoholic volume of at least 20 per cent and 25 per cent.

The taxes are expected to contribute more than VND2.9 trillion, or $131.82 million, to the State budget in 2016 and VND7.7 trillion, or $350 million, in 2018.