Coca-Cola suggests broader approach to SCT

While agreeing with the spirit of taxation and carrying a spotless record of tax payments, Coca-Cola Vietnam claims the Ministry of Financial's proposal to isolate non-alcoholic beverages and soft drinks for taxation goes against international best practices.

MoF would add 10-20 per cent SCT on soft drinks to restrict consumption
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A representative of Coca-Cola system told VIR that the corporation agrees with the spirit of taxation because Coca-Cola recognises that governments need revenue for constructing infrastructure and providing necessary services and the Coca-Cola system has consistently paid all taxes according to local laws.

However, Coca-Cola opposes the isolation of non-alcoholic beverages for the addition of special consumption tax (SCT). The discriminatory taxes conflict with the best practices in international fiscal policy of broad-based taxes with low rates and few exceptions.

At the August 15 press conference announcing the plan to adjust some articles of the Law on Tax, the Ministry of Finance (MoF) proposed applying an SCT of 10 or 20 per cent on soft drinks from 2019.

Soft drinks, including carbonated and non-carbonated soft drinks, energy drinks, instant tea, and coffee, would be subject to the SCT.

According to a representative of MoF, adding these soft drinks to the list of items subject to SCT aims to restrain consumption in Vietnam, decreasing the negative health effects caused by soft drinks.

According to MoF figures, 25 per cent of the Vietnamese population is overweight and obese. During the period of 2000-2015, the number of overweight and obese children increased eight-fold. This issue contributes to a large number of diseases, such as cardiovascular issues, hypertension, and stroke, and soft drinks are a major cause.

In Thailand, soft drinks have to bear SCT of 20-25 per cent, while the figure is 5-10 per cent in Laos and 10 per cent in Cambodia.

Three other countries in the ASEAN, namely Myanmar, the Philippines, and Indonesia, are also considering applying the SCT on soft drinks.

It is not the first time that MoF has submitted this proposal. In February 2014, MoF released its first draft Law on Special Consumption Tax that proposed a 10 per cent tax on carbonated soft drinks, citing several studies that pointed out their potentially harmful effects on human health. The ministry said that their consumption should be controlled in the same way as cigarettes and alcohol.

However, at the time, the proposal received pronounced opposition from both government bodies and beverage companies, and most notably, foreign beverage producers in Vietnam from the moment it made headlines.

The Ministry of Planning and Investment dismissed MoF’s proposal and explanation as unconvincing, casting doubts on the arguments about the negative impact of carbonated soft drinks on consumer health.

The Ministry of Industry and Trade also expressed concerns that SCT would hit both foreign and domestic producers of carbonated soft drinks.

Finally, in August 2014, MoF decided to withdraw its proposal—to table it once again.

By Kim Oanh