Industry bitter about Vietnam tax on sweetened drinks

A Finance Ministry proposal to slap a 10 percent special consumption tax on sweetened drinks would hurt small and medium businesses, critics say.

Business representatives and some experts say the beverage industry is already taxed heavily, and the latest addition could prove to the last straw.

The tax proposal, first announced last year and expected to take effect in 2019, aims to promote healthier habits by discouraging the consumption of sweetened drinks. The Ministry has cited reports from the World Health Organization, saying overconsumption of sweetened drinks lead to obesity and that a fourth of Vietnam’s population are already obese or overweight adults.

“The tax will help regulate the consumption of sweetened beverages, and it's also an international norm,” the proposal says.

However, the Vietnam Association of Liquor, Beer and Beverage (VBA) has protested the move, saying the tax could hurt small and medium businesses by promoting circulation of fake products.

“The tax proposal would lead to higher production costs, allowing fake and low-quality products to thrive,” it said in a statement.

Many industry insiders also say they are already paying no less than 10 different types of taxes.

“If this tax proposal passes, we won’t be able to survive,” a Thursday report by the Tuoi Tre newspaper quoted an unnamed vice director of a beverage firm in the southeast province of Binh Duong as saying.

Nguyen Van Viet, president of VBA, suggested an incremental imposition of the tax in order to reduce the burden on businesses.

The industry stand has been backed by several ministries, who rejected the Finance Ministry’s rationale that sweetened drinks contain an unhealthy amount of sugar, warranting a special consumption tax.

The Ministry of Industry and Trade said in a statement that imposing a special consumption tax on sweetened drinks because they contain sugar was not a convincing enough reason.

It said the Finance Ministry needs to give clearer explanations for its proposal.

The Trade Ministry statement echoed the argument made last October by the Vietnam Chamber of Commerce and Industry (VCCI) that a special tax should only be imposed after adequate studies have been made on the drinks’ impacts on consumer health and if the tax could help reduce the risks significantly.

The Ministry of Planning and Investment is also against the proposal, which it says could adversely affect the beverage industry and its large workforce.

In Vietnam, special consumption taxes are levied on items and services considered unhealthy or luxurious, like tobacco, liquor and cars.

Many Southeast Asian countries have already imposed taxes on sugary drinks, according to the Finance Ministry. The current rate is 20-25 percent in Thailand, 5-10 percent in Laos and 10 percent in Cambodia.

Myanmar, the Philippines and Indonesia are considering a similar tax.