Saturday, 18 Nov 2017

Vietnam will apply special consumption tax on... sidewalk coffee?

Updated at Friday, 25 Aug 2017, 09:27
The Hanoitimes - The proposal creates controversial opinions among Vietnam business and law community.
The Ministry of Finance has proposed the addition of soft drinks, including carbonated, non-carbonated drinks, instant packed tea and coffee into special consumption tax (SCT) items. The ministry proposes two options: 10% or 20% tax rate from 2019.
Thus, if this proposal is approved, instant tea or coffee and cigarettes, cigars, beer, karaoke, massage, casino business are all subjected to SCT.
Increase taxes due to... obesity warnings
Explaining the addition of these commodities to taxable objects, Mr. Pham Dinh Thi, Director of Tax Policy Department, Ministry of Finance, said: "This is to comply with international practices and guidelines on consumption regulation for sugary drinks to protect people’s health."
Representatives of the Ministry of Finance further explained that sugary drinks are popular drinks. However, the use of sugary drinks is associated with increased energy intake, weight gain and obesity, and many other adverse health effects including cardiovascular and diabetes.
In Vietnam, overweight and obesity account for about 25% of the population. For children under five years old, the incidence of obesity increased rapidly from 0.6% in 2000 to 5.3% in 2015; In Ho Chi Minh City, this rate is up to 10.8%, especially in the central region, this rate is up to 12% - higher than the average standard of Asia and developing countries.
It is unreasonable
That is the general opinion of enterprises, associations and experts in the coffee and tea industry regarding to this proposal.
"Tea and coffee are cheap and popular items without health hazards, so it is not necessary to impose SCT. When manufacturers are subject to SCT of 10% -20%, they will increase prices for retailers and cafes so consumers are also affected "- Mr. Dinh Quan from Thu Duc district (Ho Chi Minh city) said.
Lawyer Tran Xoa, Director of Minh Dang Quang Law Firm, also pointed out that SCT is for the manufacturer. However, this tax is calculated by the manufacturer on the selling prices for distributors and retailers. Then distributors and retailers will increase selling prices to the market. So, if coffee and tea are subjected to SCT, consumers must pay more tax.
Mr. Do Ha Nam, vice president of the Vietnam Coffee and Cocoa Association (VICOFA), said that he "opposed to the SCT proposal." Mr. Nam said that it is unreasonable because packaged instant coffee is a high added value product. This shall result to the elimination of the quality improvement.
No taxtation on popular items
Mr. Nguyen Minh Phong, an economist, said that the Ministry of Finance seems to be too eager to increase the common VAT rate to 12% as well as SCT on some commodities. The nature of this policy is to increase State budget and is opposed by most of the people and experts.
Mr. Phong added that there are many studies evidencing that tea is good to the people’s health. Therefore, the Ministry of Finance should consider more on this proposal.
Experts share the same view that the ministry only thinks of the revenues but not the social impact. The budget is difficult, but it cannot be suffered by the taxpayers while the loss, waste, corruption and withdrawal ... are still not overcome. Otherwise, revenue from tax payment can never be enough.
Who should be subjected to the SCT?
Objects of SCT should be goods and services that is not really necessary for people’s daily consumption and have certain impacts on users, environment and society.
According to the current SCT law, this kind of tax is subjected to cigarettes, cigars and other tobacco preparations for aspiration, inhalation, chewing or wine, beer; cars under 24 seats; two-wheelers, three-wheelers motorbike with a cylinder capacity of above 125 cm3; Airplanes, yachts; Petrol of all kinds; Air conditioners with capacity of 90,000 BTU or less; joss paper.
Taxable objects and services include business of dance hall, massage, karaoke, casino, electronic games with prizes, bets and lottery ...
Cam Anh
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