Soft drink firms make big money, pay small taxes in Vietnam

By Anh Tu, Minh Son, Minh Nga   July 6, 2018 | 01:15 am PT
Four market leaders pay a miniscule amount as taxes on millions of dollars they rake in, it is claimed.

Business has been sweet for the four major companies that dominate Vietnam’s soft drinks market, but they pay a relative pittance in taxes.

The big 4 in Vietnam’s sweetened beverage market are: Coca-cola Vietnam, an arm of American Coca-cola, Suntory Pepsico, a fully foreign owned joint venture between U.S. PepsiCo Inc. and Japan’s Suntory Holdings Limited, URC Vietnam based in the Philippines, and Vietnamese firm Tan Hiep Phat.

High consumption in Vietnam has boosted revenues for these firms, Suntory Pepsico leading the way.

Truong Tuyet Mai, deputy director of the National Institute of Nutrition, said in June that Vietnamese people are forecast to consume over 5 billion liters of sweetened drinks in 2018, nine times more than in 2000, and the figure is estimated to reach 11 billion by 2025.

According to Vietnam Association of Liquor, Beer and Beverages, a Vietnamese person currently consume more than 23 liters of soft drinks per year and the figure will keep rising in the future.

To date, Vietnam has not imposed a special consumption tax on sweetened drinks, collecting just corporate income tax. The tax paid by firms making the sweetened drinks has, therefore, been quite modest, compared to their revenues.

Economist Vu Dinh Anh told VnExpress International via phone on Friday that "there might be two reasons for the low income of these companies: one is transfer pricing and the other is the high expenditure on advertisement."

As for advertisement, it is easy to understand that those companies have to spend a big sum each year on all media channels for their products, Anh said.

Vietnam used to put a cap on the spending for advertisement but that policy is no longer applied, said Anh.

Those two reasons might result in the low income and lead to the low corporate income tax payment, he added.

The Ministry of Finance has proposed a 10 percent special consumption tax on different type of beverages, including sweetened drinks.

If passed, the proposal will go into effect in 2019.

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