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MOF attempts to tax higher on wine, tobacco, levy tax on fizzy soft drinks

(11:25:57 AM 11/02/2014)
(Tinmoitruong.vn) - The Ministry of Finance (MOF) has submitted to the government the draft luxury tax law, suggesting the 15-30 percent tax increases on wine, beer, and tobacco, which aims to restrict the domestic consumption.

 

If the suggested tax increase of 15 percent for wine and beer as of July 1, 2015 is approved, MOF hopes to collect VND7.8 trillion more in tax from breweries for the state budget in 2016, VND9 trillion more in 2017 and VND10.3 trillion in 2018.

 

The figures would be VND389 billion, VND447 billion and VND514 billion in 2016, 2017 and 2018, respectively.

 

MOF believes that it is necessary to raise tax in order to restrict the consumption. In 2013, Vietnam consumed 3 billion liters of beer, or 32 liters per capita. The figures have made Vietnam the biggest beer drinker in ASEAN and put into the third position in Asia, just to China and Japan.

 

Despite the modest income per capita, about $1,900 by the end of 2013, Vietnam still ranks the 28th in the world in terms of the consumed beer volume. The overuse of beer is not good for people’s health, while it is the reason behind a lot of other serious problems, including family violence, social security, crimes and traffic accidents.

 

MOF attempts to put non-alcoholic fizzy soft drinks onto the list of goods subject to luxury tax. Explaining the suggestion of 10 percent taxation, MOF said that the drinks contain industrial substances, including flavors, colorants and preservatives, which, according to health experts, will harm people’s health if overusing.

 

The same products are being an levied excise tax in many other regional countries. Thailand, for example, applies both the percentage and fixed tax rates on the products (20 percent and baht0.45 per 440cc). Cambodia taxes 10 percent and Laos 20 percent.

 

A report by MOF showed that Vietnam consumed 925 million fizzy soft drinks in 2013. If noting that the average selling price at VND11.987 per liter and the luxury tax of 10 percent, or VND1,200 per liter, the State would be able to collect VND1.5 trillion more in luxury tax by 2016 and VND1.9 trillion by 2018.

 

As for tobacco, MOF has proposed to tax 75 percent instead of 65 currently from July 1, 2015. A further tax increase of 10 percent from January 1, 2018 has been suggested.

 

If so, the state budget would have VND2.93 trillion more from tax to be collected from tobacco manufacturers, VND3.3 trillion more by 2017 and VND7.7 trillion by 2018.

 

A report showed that there are 15 million smokers in Vietnam. Tobacco was believed to be the direct reason behind the 40,000 death cases in 2008, while the figure is predicted to rise to 50,000 by 2023.

 

Analysts have commented that if the tax increase plan is approved, brewery and tobacco manufacturers would raise the selling prices to ensure their profits.

 

However, Tran Son Chau, General Director of Vinataba, the biggest Vietnamese tobacco manufacturer, said on Tuoi tre that it is necessary to think carefully about this, because any price increases would affect the sales, while the Vietnamese income is lower than that in other regional countries.

 

However, Chau said the tax increase would not be a big problem for Vinataba if the State can prevent the smuggling. It is estimated that 1 billion packs are smuggled to Vietnam every year

Duy Anh (vietnamnet)
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