VCCI: Soft drinks should not be taxed to reduce obesity
The Vietnam Chamber of Commerce and Industry (VCCI) has said the proposal to impose a special consumption tax of 10 per cent on soft drinks should be postponed until there is a comprehensive study conducted that confirms its full impact on cutting obesity in Vietnam.
In a proposal sent to the Ministry of Finance (MoF), Head of VCCI’s Legal Department Mr. Dau Anh Tuan said the 10 per cent tax may not affect urban families but would have a significant impact on the spending of many families in rural and remote areas.
“Taxes on soft drinks may not only deprive rural children of this treat, but may also slow the progress of eradicating child malnutrition,” Mr. Tuan said. More importantly, “the proposal would not only affect beverage companies, sugarcane companies, and sugarcane farmers, but also businesses and farmers in the coffee, tea, and dairy sectors.”
Aimed at reducing obesity and weight problems, VCCI believes the 10 per cent tax on soft drinks is reasonable but it is necessary to anticipate some of its negative effects, as it may impact on the consumption capacity of households in rural, remote and isolated areas, and enterprises and farmers in certain agricultural sectors.
If such research proves that the tax would help reduce obesity, it should only be imposed on drinks that are high in sugar content, according to VCCI. This helps not only to avoid the imposition on products with natural sugar content that the manufacturers cannot separate, but also suits the purpose because drinks with low sugar content do not cause obesity.
On August 17, MoF submitted to the National Assembly a draft amending five laws, including laws on value added tax (VAT), corporate income tax (CIT), personal income tax (PIT), special consumption tax, and the resources tax, insisting that raising a number of different taxes and fees is essential and an international norm amid widespread public opposition to the idea.
According to the ministry, the higher taxes are designed to make up for an inevitable shortfall that will occur when Vietnam fulfills its commitments to free trade agreements and removes import tariffs, and will also help tackle rising public debt.
In an earlier letter sent to the finance ministry this month, VCCI also asked officials to reconsider its decision to raise the VAT rate as it believes higher rates would hit low-income earners the hardest.
Essential products cost just the same for low-income and high-income earners. When VAT is increased, the burden is heavier on low-income earners as they have less ability to pay.
“Regarding the social impact, a higher VAT rate would expand the rich-poor divide and lead to unpleasant repercussions for society,” it argued.
In addition, raising VAT would stem consumption demand, which could affect economic growth. If VAT rises, the private sector will suffer because foreign direct investment (FDI) companies mostly focus on making products for export that are VAT exempt, while State-owned enterprises (SOEs) can benefit as they collect taxes from non-core businesses. “This is bad news for Vietnam’s job market, as private firms create more jobs than FDI firms and SOEs, especially as Vietnam has around 1 million people entering the workforce each year,” VCCI concluded.
In a proposal sent to the Ministry of Finance (MoF), Head of VCCI’s Legal Department Mr. Dau Anh Tuan said the 10 per cent tax may not affect urban families but would have a significant impact on the spending of many families in rural and remote areas.
“Taxes on soft drinks may not only deprive rural children of this treat, but may also slow the progress of eradicating child malnutrition,” Mr. Tuan said. More importantly, “the proposal would not only affect beverage companies, sugarcane companies, and sugarcane farmers, but also businesses and farmers in the coffee, tea, and dairy sectors.”
Aimed at reducing obesity and weight problems, VCCI believes the 10 per cent tax on soft drinks is reasonable but it is necessary to anticipate some of its negative effects, as it may impact on the consumption capacity of households in rural, remote and isolated areas, and enterprises and farmers in certain agricultural sectors.
If such research proves that the tax would help reduce obesity, it should only be imposed on drinks that are high in sugar content, according to VCCI. This helps not only to avoid the imposition on products with natural sugar content that the manufacturers cannot separate, but also suits the purpose because drinks with low sugar content do not cause obesity.
On August 17, MoF submitted to the National Assembly a draft amending five laws, including laws on value added tax (VAT), corporate income tax (CIT), personal income tax (PIT), special consumption tax, and the resources tax, insisting that raising a number of different taxes and fees is essential and an international norm amid widespread public opposition to the idea.
According to the ministry, the higher taxes are designed to make up for an inevitable shortfall that will occur when Vietnam fulfills its commitments to free trade agreements and removes import tariffs, and will also help tackle rising public debt.
In an earlier letter sent to the finance ministry this month, VCCI also asked officials to reconsider its decision to raise the VAT rate as it believes higher rates would hit low-income earners the hardest.
Essential products cost just the same for low-income and high-income earners. When VAT is increased, the burden is heavier on low-income earners as they have less ability to pay.
“Regarding the social impact, a higher VAT rate would expand the rich-poor divide and lead to unpleasant repercussions for society,” it argued.
In addition, raising VAT would stem consumption demand, which could affect economic growth. If VAT rises, the private sector will suffer because foreign direct investment (FDI) companies mostly focus on making products for export that are VAT exempt, while State-owned enterprises (SOEs) can benefit as they collect taxes from non-core businesses. “This is bad news for Vietnam’s job market, as private firms create more jobs than FDI firms and SOEs, especially as Vietnam has around 1 million people entering the workforce each year,” VCCI concluded.
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