WHO backs Vietnam's new tax proposal on sugary drinks

World Health Organization (WHO) experts have expressed strong support for a new tax on sugary drinks proposed by the Ministry of Finance.

The proposal, which will go into effect in 2019 if passed, will impose a 10 percent special consumption tax on different type of beverages, including sweetened drinks.

While the tax aims to prompt a shift from unhealthy consumption habits, it has been criticized by business representatives and experts who say the industry is already taxed heavily.

The tax proposal comes in the wake of Vietnam being put on high alert over its consumption of sugary drinks, which has skyrocketed over the last 15 years.

The WHO noted that a fourth of Vietnam’s population was already obese or overweight.

Guilermo Paraje, a WHO consultant, said the 10 percent special consumption tax will increase the average price of sweetened drinks in the Vietnamese market by 5 percent, and provide a VND4 trillion ($173.9 million) boost to the state budget.

He further suggested three tax proposals that would increase the tax contribution to VND12 trillion - one liter of sweetened beverages will be taxed VND3,500; VND35 per gram of sugar in every 100 milliliters of a drink; or a 40 percent tax on factory price. All three options will increase average soda prices by 20 percent.

“People will substitute sugary drinks with water or other products, leading to alternative jobs. The industry has also experienced industrialization so there are not many job opportunities in this sector,” Paraje said.

Dr. Jun Nakagawa, WHO representative in Vietnam, said excessive consumption of sugar was the leading cause of overweight and obesity, which are linked to many health risks such as diabetes, heart disease and gout.

Vietnam has added sugary drinks to the list of items to be placed under stricter control and tax regulations, along with cigarettes and alcohol.

The government has banned the sale of soft drinks in all school canteens across Vietnam.

Truong Tuyet Mai, deputy director of the National Institute of Nutrition, said 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.

The new 10 percent special consumption tax would also accrue to other beverages, including carbonated or non-carbonated soft drinks, juices, flavored water, energy drinks, instant tea, pre-packed coffee and flavored milk.