Revised Law on Special Consumption Tax to reduce consumption rate of products harmful to health

Tax is a key solution to regulate consumer behavior for tobacco, alcohol and sugary drinks that are harmful to health. Illustrative photo: H.Anh

Keeping up with the trend of expanding the tax base

According to Mr. Truong Ba Tuan, Deputy Director of Department of the Tax policies, fees and charges Supervisory Authority (the Ministry of Finance), the current Law on Special Consumption Tax stipulates 10 commodity groups and six service groups subject to the Special Consumption Tax. The policies of other countries show that goods subject to the Special Consumption Tax of other countries are very diverse. For example, China imposes the Special Consumption Tax on 15 groups of goods, Thailand imposes the tax on 17 groups of goods and services...

Notably, four basic product groups are imposed the Special Consumption Tax in most countries, including tobacco products; alcoholic beverages (wines, beers) and sugary or carbonated soft drinks; petroleum products (gasoline, oil); automobiles. Mr. Truong Ba Tuan said that many countries around the world has reformed the Special Consumption Tax by expanding the tax base to limit  the consumption of goods that are harmful to public health, children, the environment, or the State regulates consumption and supplements new goods and services to the Special Consumption Taxable (such as sugary soft drinks).

According to the representative of the drafting agency, the amendment of the Law on Special Consumption Tax aims to overcome the limit ations and shortcomings of the current Law. For example, regulations on taxable subjects, non-taxable subjects, and descriptions of goods in the tax nomenclature are not specify and not consistent with the specialized laws, leading to the difficulties in implementation; the Special Consumption Tax rate for tobacco, alcohol, beer, and automobiles is still low, so it is not effective enough to limit  consumption or regulate the income of high-income users in society; some objectives on the Special Consumption Tax policy stated in the Tax System Reform Strategy for the period 2011-2020, which are to study the application of mixed tax methods for goods harmful to health and the environment, have not been implemented; there are no regulations on refunding Special Consumption Tax for the amount of special consumption tax that has not been fully deducted for some goods that need to encourage the production and consumption of environmentally friendly products.

Regarding the revision of the non-taxable subjects in the draft Law, Ms. Le Thuy Linh, Deputy Head of the Special Consumption Tax Division, Department of the Tax policies, fees and charges Supervisory Authority, said that the draft law amends and supplements a number of subjects not subject to Special Consumption Tax, such as: adding the provision that “goods exported abroad and returned by foreign parties upon import” are not subject to Special Consumption Tax; supplementing the provisions on “passenger cars, four-wheeled passenger cars with engines that are not registered for circulation, do not participate in traffic and only operate in historical sites, hospitals, schools” and “other specialized cars under the Government regulations” to ensure feasibility in implementation…

Tax is a key solution to regulate consumer behavior

Regarding the special consumption tax rate on tobacco products, the representative of the Department of the Tax policies, fees and charges Supervisory Authority, said that the Government considers the option of increasing the tax rate by VND1,000/pack per year in the period of 2026 - 2029, and increasing by about VND 2,000/pack by 2030. The tax rate for shredded tobacco, pipe tobacco or other types, other products from tobacco plants used for smoking, inhaling, chewing, sniffing, or sucking will increase from VND50,000/100g or 100ml (from 2026), VND 60,000/100g or 100ml (from 2027), VND 70,000/100g or 100ml (from 2028), VND 80,000/100g or 100ml (from 2029), VND 100,000/100g or 100ml (from 2030). According to the drafting agency, if this roadmap is applied, the smoking rate among men is expected to decrease from 42.7% (2022) to 39.7% in 2026 and to 38.6% by 2030.

For alcohol and beer, the Government considers the option of increasing the tax rate from the current level of 65% to 80%, 85%, 90%, 95%, 100% per year in the period from 2026 to 2030. For soft drinks under Vietnamese Standards (TCVN) with a sugar content of over 5g/100ml, the tax rate will be 10% because this is a new item subject to Special Consumption Tax.

Regarding the Special Consumption Tax, experts said that the increase in the Special Consumption Tax not only regulates the consumption of products harmful to health and the environment to improve the health of the whole population, labor productivity and sustainable development, but also helps to significantly raise the State revenue... Economic expert Dao The Son said that in order to achieve the national goal of reducing smoking rates, it is necessary to increase taxes under the recommendations of the Ministry of Health and WHO by adding an absolute tax of VND 5,000/pack from 2026 and increasing it to VND 15,000/pack by 2030.

Dr. Nguyen Huy Quang, Head of Social Advisory, Criticism and Appraisal Board (Vietnam Medical Association) agreed with the need to amend the Law on Special Consumption Tax and emphasized that tax is a key solution to regulate consumer behavior for tobacco, alcohol and sugary drinks that are harmful to health. If the tax rate is increased to increase the price by 10%, it will reduce the consumption of tobacco and alcohol by about 5-8%, and the consumption of sugary drinks by 8%-13%.

According to the WHO Framework Convention on Tobacco Control, tobacco tax is the optimal solution that determines 50-60% of the effectiveness in preventing the harmful effects of tobacco. However, the imposition of Special Consumption Tax on tobacco, alcohol and sugary drinks needs to create a balance between economic benefits and people's health, but health is still the central issue in the policy of human resource development, social security and environmental protection. This is an issue of sustainable development to which the Party and the State have made strong commitments.