Finance ministry again moots tax on sweetened beverages

A “reasonable” special consumption tax on sugary drinks would help protect people’s health in line with the World Health Organization’s recommendation and international practice, it said.

Consumption of sweetened beverages in Vietnam had surged by nearly eight times between 2002 and 2018 to 50.7 liters per person per year.

Surveys by the National Institute of Nutrition in 2001-10 and 2011-20 found the rate of overweight children rising quickly in both urban and rural areas.

In 2012 there were 15 countries imposing a tax on sweetened beverages, but by 2021 it had risen to 50, including six in Vietnam’s neighborhood: Thailand, the Philippines, Malaysia, Laos, Cambodia, and Myanmar.

“WHO recommends that governments take actions to encourage people to consume healthy food, including using tax measures on sugary drinks to orient consumption,” the ministry said.

In 2014 the ministry had proposed a 10% special consumption tax on sweetened beverages, but other ministries opposed it. The Ministries of Planning and Investment and Justice said the argument for the tax was not convincing, and the Ministry of Industry and Trade said it could have a negative impact on businesses.

The finance ministry is also considering hikes in the special consumption tax on beer and other alcoholic beverages and cigarettes.

Between 2016 and 2019 it had increased the rate on beer and certain alcoholic beverages from 55% to 65% and on cigarettes and cigars from 70% to 75%.

But the hikes do not seem have had much effect, the ministry admitted.

Vietnam remained the biggest beer consumer in Southeast Asia and third biggest in Asia. In 2019 an average person consumed 47.6 liters a year, 20% more than in 2015.

In 2020 around 42.3% of Vietnamese men smoked, while the government’s target had been to bring it down to 37%.

But the country’s taxes on alcoholic drinks remain lower than in other countries, and account for only 30% of retail price compared to 40-85% elsewhere, according to WHO.

On cigarettes, the rate is 35% compared to 70% in Thailand, 69% in Singapore, 57% in Malaysia, and 51% in Indonesia. It is as high as 80% in France and 75% in Germany.

Another reason for the ministry’s proposal to increase the tax is that prices of alcoholic drinks have been rising slower than average incomes.

In 1998 it had taken a person 8.2% of their annual income to buy 10 liters of Vodka Hanoi, but by 2014 the ratio had dropped to 2.2%. In the case of red wine, the rate had dropped from 5.9% to 1.6%.