The amendment of Special Consumption Tax (SCT) is attracting much attention. One of the focuses is tax imposed on products that may be harmful to the health of consumers, like tobacco, alcohol and carbonated drinks.
Products not advisable to use
For a long time, many people were warned of health statement relating to alcohol and other drinks. By some statistics, in Vietnam, just 4 percent of all accidents are brought on by alcohol, but according to the World Health Organisation, about 30 percent of deadly accidents involved alcohol.
Referring to the Vietnamese development plan for the alcoholic beverage industry to 2015 and toward 2025 approved by the Ministry of Industry and Trade, alcohol consumption is much higher than that of carbonated drinks. In 2010, beer and alcohol reached 2.5 billion litres and 80 million litres of production respectively; till 2015, they will account for 4 billion litres and 188 million litres of production. In 2013, alcohol beverage consumption reached 3 billion litres, meaning each person will consume 32 litres yearly.
Currently, the tax rate on retail cigarettes of Vietnam is 45 percent that is the lowest one and stays at the 6th place in the region (Thailand: 70 percent; Singapore: 69 percent; Indonesia: 52 percent; Myanmar: 50 percent; Malaysia: 45 percent) and that is lower than that in developed countries like Australia: 62 percent; Germany: 75 percent; France: 80 percent, according to the General Statistics Office (GSO).
Also according to GSO, in 2013 Vietnamese people consumed 925 million litres of non-alcoholic carbonated beverages at average price of VND11,987 a litre, therefore a tax rate of 10 percent will not largely affect enterprises. National budget receipt is estimated to increase about VND1,500 billion in 2016 and about VND1,900 billion in 2018.
Draft on new tax rate calculation
This time the draft raises the tax rate on beer from 50 percent to 65 percent, applying from 01 July 2015. Accordingly, budget receipt from this product will increase by VND7,800 billion in 2016; by VND9,000 billion in 2017; by VND10,3000 billion in 2018. Tax rate on alcohol from 20 degrees will increase from 50 percent to 65 percent; on alcohol below 20 degrees from 25 percent to 35 percent. Therefore, national budget receipt from alcohol is calculated to rise by VND389 billion in 2016; VND447 billion in 2017 and VND514 billion in 2018.
Even tax rate on carbonated beverages will be adjusted this time because, in opinion of experts and researchers, non-alcoholic carbonated beverages have significant affects on people’s health, as much as alcohol. They are popular drinks, especially among children. Apart from pure water and natural materials, non-alcoholic carbonated beverages contain colouring and preservative agents. These industrial agents obviously can only be used in allowed level, however many health experts warns about their affect on people's health if being abused, they could even cause cancer. Therefore, a tax rate on non-alcoholic carbonated beverages of 10 percent is appropriate.
As for cigarettes, the draft makers are considering 2 options. Option 1: Calculating tax rate proportionally with selling price of manufacturing enterprises, raising SCT from 65 percent to 75 percent, and raising more by 10 percent in 2018. Option 2: Applying absolute tax combined with relative tax rate increase. Accordingly, absolute tax on a pack of cigarette is VND500, relative tax rate will be increased from 65 percent to 70 percent, and increased more by 10 percent in 2018.
Option 2 would contribute to the reduction of low quality cigarettes, which is appropriate with proposals of WHO and Law on preventing negative effects of cigarette. However, it still has many weak points. For example, it is difficult to apply and protect fair competition because regulating rate and influence level of the tax varies from types of cigarette. Regulating rate of tax on low quality cigarette is higher than that of high quality one. Moreover, base price for calculating tax will change continuously due to inflation.
Consequently, draft makers have chosen option 1, based on the selling price of manufacturing enterprises. Accordingly, the estimated national budget receipt in 2016 will be VND2,930 billion; VND3,300 billion in 2017; VND7,700 billion in 2018. However, it is not the national budget receipt that attracts draft makers’ attention.
Recently in conferences and seminars, many people have approved that increasing SCT on alcohol and tobacco is appropriate with the direction of many countries in the world. They do that for the purpose of protecting people’s health, not of increasing the national budget. There are many opinions that when tax rate is raised, market management authorities, responsible authorities in border gates will face tougher difficulties in preventing smuggling. However, it is not the reason that could stop the determination of increasing tax rate on harmful products.
Hai Ly
Vietnamese
