Consumption tax hike needed

Special consumption taxes were meant to limit the consumption of products harmful to consumers. But alcohol, beer and tobacco remain cheap and easy to buy in a local market, experts said at a forum about special consumption tax and community health held on Monday.

Nguyen Tuan Lam from the World Health Organisation (WTO) in Vietnam was quoted by infonet.com as saying that increasing tax would be a win-win solution for both the Government and citizens, amid heavy budget deficits. Citizens could potentially avoid diseases caused by consuming those products. And the national budget would have more revenue sources. Experience in Thailand and the Philippines had proven this, Lam said.

Experts said at the forum that the increases in special consumption taxes on alcohol, beer and tobacco which followed the amended Law on Special Consumption Tax 2014 were not high enough.

For example, the tax rate on tobacco increased from 65 % to 70 % at the beginning of this year. This tax rate will increase to 75 % on January 1, 2019. This would make the retail price of tobacco increase by around 2.9 % and 2.8 %, respectively. Excluding inflation, the average increase totalled just one % per year from 2015 to after 2020, compared to an average economic growth rate of 5 %.

In other words, the price of tobacco would decrease over the years, as would the prices of alcohol and beer, one expert explained. So the special consumption tax will fail to discourage consumption.

“Increasing the special consumption tax is necessary to limit consumption”, said economic expert Le Dang Doanh.

Pham Thi Hoang Anh, director of Health Bridge Vietnam, said that beer and alcohol caused 5.7 % of deaths and 4.7 % of disease burden measured by disability-adjusted life year (DALY), while tobacco accounted for 16.9 % of deaths and 8.8 % of disease burden.

Cheap tobacco, alcohol and beer was the number one cause for rampant consumption, especially in rural areas of Vietnam. This negatively impacted community health and caused economic and social burdens, Hoang Anh said quoted by the infonet.

The news website also reported that on Monday several non-Government organisations sent a document to the National Assembly and several Government agencies, regarding their agreements as to the calculation of special consumption tax as regulated in the new rules which went into effect on January 1, 2016.

The calculation of the tax is expected to push up retail prices of tobacco, alcohol and beer by 2.7 %. This would help increase budget revenue, while limiting consumption of those products, experts said.

But beverage companies want to delay the application of amended regulations on calculating special consumption tax until the beginning of 2017. They say they need time to adapt because the new legal amendments pose challenges for them.

So far, the special consumption tax - with 60 % coming from tobacco, alcohol and beer - contributed around seven % to the budget, according to Ha Huy Tuan, Deputy Chairman of the National Financial Supervisory Committee.