Central Institute for Economic Management: Special consumption tax on sugary drinks should not be imposed yet

DNHN - CIEM proposes not to impose a special consumption tax on sugary drinks at this time and recommends focusing on business support policies.

The Ministry of Finance is currently leading the drafting of amendments to the Law on Special Consumption Tax (SCT), with many important adjustments, notably the expansion of taxable items. A new addition to the draft is the inclusion of sugary drinks under SCT, with a proposed tax rate of 10%.

According to the report "Economic Impact Assessment of the Draft Special Consumption Tax on Sugary Drinks" by the Central Institute for Economic Management (CIEM), applying a 10% tax will have many negative impacts on the beverage production sector as well as the overall economy. The report uses data from the 2022 IO table and relevant official figures for analysis. The results show that imposing SCT will reduce the production scale of beverage companies, decreasing both the production value and added value of the sector. Specifically, the sector's added value will decrease by approximately 0.772%, equivalent to VND 5,650 billion. Moreover, this impact is not limited to the beverage sector but also affects 24 other economic sectors, causing the total added value of the economy to decline by 0.6%, equivalent to VND 55,077 billion, leading to a GDP drop of around 0.45%, or VND 42,570 billion.

CIEM warns that the new tax policy could negatively affect not only the beverage sector but the entire economy, especially given that businesses in this sector are vulnerable due to the pandemic and unpredictable fluctuations. Therefore, CIEM proposes not to impose SCT on sugary drinks at this time and recommends that the Government should focus on policies to support business recovery and development.

In addition to amending the Law on SCT, the draft amendment to the Law on Value-Added Tax (VAT) also proposes increasing the VAT rate on sugar and its by-products from 5% to 10%. Meanwhile, the draft amendment to the Law on Corporate Income Tax (CIT) proposes eliminating tax incentives for items subject to SCT, including sugary drinks. If these proposals are approved, beverage manufacturers will face significant pressure due to increased production costs, higher prices, and the loss of tax incentives.

CIEM suggests that the drafting agency should conduct extensive consultations with stakeholders affected by the policy and ensure transparency in the disclosure of relevant information. Additionally, the new regulations need to be comprehensively evaluated and based on scientific grounds. The Vietnam Beer - Alcohol - Beverage Association (VBA) is also advised to actively update, provide scientific information to the drafting agency, and express clear views during the feedback process for the draft law.

Linh Anh