Summary: “We recommend that the Government of Vietnam remove “non-alcoholic carbonated sweetened beverage” from the Draft Law on Excise Tax because: (1) Carbonation (CO2) in carbonated sweetened beverages is not harmful to human health; (2) The proposed excise tax on only “carbonated sweetened beverages” would be discriminatory, and would violate WTO commitments on “national treatment;” (3) the proposed excise tax on carbonated sweetened beverages would not increase tax revenue significantly, but would be disruptive and damaging to the beverage industry, as well as the economy; and (4) Vietnam would become the first and only country to impose an excise tax solely on sweetened carbonated beverages.” Recently the Ministry of Finance (“MOF”) released a draft Law on Amendment and Supplement to a Number of Provision of the Law on Special Consumption Tax (herein after referred to as “the Draft”), in which “non-alcoholic carbonated sweetened beverage” was added. According to the Ministry of Finance, one of the key rationales for adding this product to the Draft is that sweetened beverages with carbon dioxide (“CO2”) are harmful for consumers’ health. The Ministry has claimed that carbonated soft drinks may cause such health problems as obesity, diabetes, kidney stones, reduced bone density, and even cancer. We are very much concerned because, in addition to the lack of science-based evidence, the proposed imposition of excise tax on carbonated beverages, of which 88% are international brands and/or manufactured by FDI enterprises, would violate Vietnam’s international commitments to provide “national treatment” to foreign products and foreign businesses, and non-discrimination between foreign and domestic investors. We would like to detail our concerns as follows:
- Carbonation (CO2) in carbonated sweetened beverages is not harmful to human health.
To date,there has not been any science-based evidence or study confirming that CO2 in soft drinks is harmful to human health. A recent comprehensive literature review of relevant research and studies on heath effects of carbonated beverages conducted by the Institute of Health Strategy and Policy under the Ministry of Health concluded that “except for a minor possible impact on tooth enamel, the evidences in these studies cannot indicate the impacts of CO2 on any specific health status of consumers.”
- The proposed imposition of an excise tax on only “carbonated sweetened beverages” of all beverage categories would violate WTO commitments on “national treatment.”
The Draft would impose an excise tax on only “carbonated sweetened beverage”, but not other beverages. In other words, the tax is based on the CO2 content rather than sugar content, even though the drafting authority explained that the “sweetening” or “sugar” is the potential cause of negative health effects. Nearly 90% of carbonated sweetened beverages sold in Vietnam are international brands, while most non-carbonated sweetened beverages sold in Vietnam are domestic brands. The proposed tax would put Vietnamese non-carbonated soft drinks at a price advantage over international brand carbonated soft drinks. As the proposed tax would have a protectionist effect, it would cause Vietnam to violate its WTO commitment to provide “National Treatment” to foreign products and foreign investors in Vietnam.
- The proposed excise tax on carbonated sweetened beverages would not increase tax revenue significantly, but would be disruptive and damaging to the beverage industry, as well as the economy.
According to a recent study of the Central Institute of Economic Management (CIEM), the proposed excise tax on carbonated sweetened beverages would contribute only approximately US $8 million to the State budget, while causing a loss of up to US $45 million for the beverage industry and US $12 million for the economy (see Appendix C). In addition, the proposed tax would negatively affect related industries such as sugar, packaging, supply and distribution chains, and possibly increase inflation. Since the Draft was publicly released, there have been many concerns expressed by business associations, enterprises, and the public regarding the proposed taxation of carbonated sweetened beverages. We enclose some of the comments for your reference (see Appendix D).
- Vietnam would become the first and only country to impose an excise tax solely on sweetened carbonated beverages.
We studied the excise tax of more than 50 countries and found that:
- No country imposes excise tax only on carbonated sweetened beverages.
- Many countries removed excise tax on sweetened beverages due to social economic impacts while they failed to change the consumers’ health.
Based on the research and analysis discussed above, we believe that there is no scientific or economic basis for imposing an excise tax on non-alcoholic carbonated sweetened beverages. Such imposition will neither achieve the target of improving public health nor increase government revenue, while potentially making Vietnam violate international commitments and seriously impacting the beverage industry as well as the investment environment in Vietnam, lessening the trust of investors in a stable, non-discriminatory and internationally consistent business environment.
We aspire to a transparent and consultative environment mentioned in the Prime Minister’s New Year Message: “The interaction between State agencies, between the State apparatus and socio-political organizations must be strengthened. Dialogues with the people and businesses must be expanded under various forms to promote closer relationship between the State, cadres, civil servants and the people and better match policy and legislation with reality.”
Therefore, we highly recommend that, after extensive consultations on this issue, the Government of Vietnam remove “non-alcoholic carbonated sweetened beverage” from the Draft.
We sincerely thank you for your consideration of this letter, together with appendices. We hope that the information contained in this letter and attached materials will be helpful as you consider the Draft.
/s/ (signed and sealed)
Marc Townsend Chairman
American Chamber of Commerce in Vietnam Ho Chi Minh City
World Trade Organization, Report of the Working Party on the Accession of Viet Nam, WT/ACC/VNM/48, 27 October 2006, at §190
Read the full text of the letter and supporting attachments in English and/or Vietnamese
Contents English | Vietnamese
A1 Study by the Health Strategy and Policy Institute on the Health Impacts of Carbonation or CO2 in Carbonated Sweetened Drinks English | Vietnamese Note: English version includes A1 and A2 in one pdf file.
B Comments by Vietnam Sugar and Sugar Cane Assn English | Vietnamese
C2 Summary of Report by the Central Institute of Economic Management English | Vietnamese
D Comments and Recommendations from Various Associations, Enterprises, and Public on the Addition of Non-Alcoholic Carbonated Sweetened Drinks into the Law on Excise Tax English | Vietnamese Note: English version is brief summary only of Vietnamese version (87-pages) pdf.
E Global Experience of Excise Tax on Beverages English | Vietnamese