Vietnamese Deputy Prime Minister Le Minh Khai has signed the decision approving the Strategy for Tax System Reform till 2030. Accordingly, decision No. 508/D-TTg will see Vietnam adopt a road map to increase excise taxes on tobacco and alcohol products.
Tax policy reform is one of the key solutions that will be used to achieve the goals laid out in the strategy. It includes reforms of the value-added tax, the corporate income tax, personal income tax, and excise tax.
The tax system reform aligns Vietnam’s tax policy with international practices to meet resource requirements and achieve the 10-year socio-economic development strategy by 2030. Furthermore, these reforms are set to help stabilize State budget collections from taxes and costs in association with socio-economic development strategies for 2021-25 and 2026-30.
The Vietnamese government will offer support in the initial phase of the reforms to help businesses and people resume operations after the negative impacts of COVID-19.
The government hopes to reach 90% taxpayer satisfaction with tax agencies by 2025 and provide over 70% support for people paying taxes electronically.
Alcohol and tobacco excise tax increases
For excise tax: The government will develop a road map adjusting tax increases for tobacco and alcohol products
The aim of excise tax increases for alcohol and tobacco are two-fold:
- Limit production and consumption and fulfil international commitments, and
- Review and adjust the excise tax rates on several commodity items to suit social-economic conditions in the 2021-2030 period.
By increasing taxes on these health harmful commodities, the government intends to reduce consumption of these products and protect people’s health and the environment.
Overview of the other tax reforms
For value-added tax: The government will expand the tax base by reducing the group of goods not subject to value-added tax and the group of goods and services to apply the 5% tax rate.
Vietnam will increase the value-added tax rate as per a road map that adjusts the revenue threshold by applying the deduction method to suit reality. Percentage tax will be applied to taxpayers whose revenue is below the threshold or who are not eligible for the deduction method.
For corporate income tax: The government will amend or abolish tax exemption and reduction incentives that are no longer consistent with development requirements and international integration requirements. Meanwhile, corporate income tax incentives for small and micro enterprises will be implemented.
For personal income tax: The government will conduct an additional review of taxpayers. Attention will be paid to adjusting the amount and tax rates suitable to taxable income and the nature of each type of income.
The decision also states that any regulations on tax exemption and reduction will be supplemented with the country’s socio-economic context in each period and in line with international practices.
Alcohol taxes can mobilize domestic resources and reduce the alcohol burden in Vietnam
At the Vietnam Economic Pulse Forum held November last year, Professor Jonathan Pincus, UNDP Senior International Economist stressed the importance of domestic resource mobilization to increase long-term finance for productive investment in Vietnam.
The new initiative of the government in Vietnam to increase alcohol excise tax is one key solution for the country to improve population health and increase domestic resources for health promotion. This can enable Vietnam to reach its ten-year development strategy of achieving upper-middle-income status by 2030 and high-income status by 2045.
The tax increase comes at a crucial juncture for Vietnam. The country has been seeing rapidly rising alcohol use in recent years.
- As Movendi International reported previously, Vietnam is Asia’s third-largest beer consumer, after China and Japan.
- In the six years prior to 2019, Vietnam saw beer volumes climb by an average 6.6% compared to an increase of 0.2% for consumption globally.
- Alcohol consumption in Vietnamese adolescents is at an alarming level and increasing. According to the national survey of adolescents and youths in 2008, approximately 80% of young men and 36.5% of young women aged 14 to 25 years used alcohol.
With rising alcohol use, the burden of alcohol harm has been growing in Vietnam, affecting people and communities severely.
- According to research on the global burden of disease in 2016, 12% of deaths in Vietnam are associated with alcohol use.
- There is a heavy burden of social harm caused by alcohol in Vietnam as well.
- Of married women or those living with their partners, 32.5% experienced some form of harm from their partner’s or husband’s heavy alcohol use.
- Further, 21% of parents/caregivers said that children in the family suffer harm from the alcohol use of others.
Alcohol industry policy interference in Vietnam
One of the reasons why Vietnam has not had a proper alcohol excise tax increase is the heavy policy interference by the alcohol industry.
In 2019, the National Assembly of Vietnam passed the Alcohol Harm Prevention Law. It came into effect in the beginning of 2020. But controversially, it did not include alcohol taxation or another pricing policy measure.
The National Assembly decided that the proposal to raise the alcohol price would be discussed within the premise of a separate law on taxation.
As Movendi International previously reported, this law was heavily influenced and watered down by Big Alcohol lobbying.
There was also heavy lobbying before implementation of the Alcohol Harm Prevention Law to nullify and weaken key components of the law throughout the process which lasted from 2017 till the law was passed in 2019.
Nevertheless, the new law ensures much better regulations for alcohol marketing and reducing availability and encompasses several of the WHO-recommended alcohol policy best buy solutions.
[This article was edited on June 6, 2022, as per information from Vietnam+]
Sources:
Sàigòn Giai Phóng Online: “Vietnam to increase excise taxes on tobacco, alcohol products“
Vietnam+: “Tax system reform strategy to 2030 approved“
