In the first half of 2023, the Ministry of Finance of Vietnam has consulted the people and those affected by the special consumption tax in the Draft Law on Special Consumption Tax (amended). As part of the Tax System Reform Strategy 2021-2030, the Draft Law on Special Consumption Tax of Vietnam includes four major policy groups, regulating the operation and management of Vietnam’s tax system.
The Law on Special Consumption Tax No. 27/2008/QH12 replaces the Law on Special Consumption Tax in 1999, the Amendment on the Law on Special Consumption Tax in 2003, the Amendment on the Law on Special Consumption Tax and the Law on Value-Add Tax in 2005. The Law on Special Consumption Tax 2008 has been amended and supplemented four times consequently in Law No. 70/2014/QH13, Law No. 71/2014/QH13, Law No. 106/2016/QH13, Law No. 03/2022/QH15.
Although undergoing many revisions, in order to meet the continuously expanding and developing business activities, and at the same time to solve some difficulties and inadequacies that have not been completely resolved in the previous revisions, the urgent issue at present is to develop and draft Vietnam’s Special Consumption Tax Law in 2023 in order to achieve goals such as implementing the Party’s and State’s guidelines on socio-economic development, convert to green energy, reduce emissions of gases harmful to health and the environment; promptly remove difficulties for production and business activities, reform administrative procedures, open up and promote resources for socio-economic development; ensure the consistency and synchronization of the legal system; in line with international tax reform trends; ensure stable state budget revenue.
It is expected that the process of drafting and developing Vietnam’s Draft Law on Special Consumption Tax in 2023 will proceed as follows: The Government makes a proposal to develop a revised draft Law on Special Consumption Tax and submits it to the Standing Committee of the National Assembly to report to the National Assembly for approval of the program for the development of laws and ordinances in 2023 at the 6th session (October 2023), submitted to the National Assembly for comments and expected to approve the draft Law on Special Consumption Tax (amended) at the 7th session (May 2024).
Policies in the Draft Law on Special Consumption Tax of Vietnam in 2023
The draft Law on Special Consumption Tax of Vietnam in 2023 has four major groups of policies, including:
Policy 1: Expanding the tax base according to the guidelines of the Party and State and in line with international practices (adding taxable subjects and applying appropriate tax rates)
The solution is to additionally research and impose special consumption tax on products that are not beneficial to health, the environment and services with limited use according to the guidelines of the Party and State such as: sugary beverages; barley and non-alcoholic beverages; new cigarettes and equipment, parts and solutions of new cigarettes; business online video game services,…
Policy 2: Adjusting the special consumption tax rate for a number of items harmful to health and a number of items in order to contribute to environmental protection
The solution is to study additionally applying absolute tax, applying a combination of proportional tax rate and absolute tax rate for some items; increase the special consumption tax rate on a number of products harmful to health (tobacco, alcohol, beer) to limit import, production and consumption; adjust special consumption tax rates for some environmentally friendly products and overcome inadequacies arising in practice.
Policy 3: Amending and supplementing a number of contents in the Law to ensure the legal basis, remove difficulties for businesses, ensure a transparent and consistent policy with other relevant laws
The solution is to supplement regulations on taxable subjects and non-special consumption taxable subjects to ensure the legal basis for solving arising problems, in sync with other laws (Vietnam Civil Aviation Law, Import and Export Tax Law, Value Added Tax Law, Environmental Protection Tax Law, Vietnam Standards on Road Vehicles – Automobiles,…).
Policy 4: Amendments and supplements to the terms of the implementation guide
The urgent need posed when promulgating the amendment and supplement to the Law on Special Consumption Tax is the issuance of corresponding circulars and decrees guiding its implementation right after the Law is passed. Because circulars and implementing decrees are legal tools used to guide the implementation of a country’s legal regulations when the general provisions in the Law is unclear.
Therefore, to ensure that legal provisions are properly and effectively applied, more specific guidance documents on how to implement them are needed. The promulgation should be prepared before the Law is passed, especially urgently when the Law on Special Consumption Tax is an important law, affecting many professions and fields in society.
Points of contrary views in the Draft Law on Special Consumption Tax of Vietnam
Proposal to impose tax on online video games
One of the notable new points in Vietnam’s Draft Law on Special Consumption Tax is the proposal to make online video game services subject to special consumption tax.
According to the Ministry of Finance of Vietnam, the online video game service industry, commonly known as interactive online games between players and players in Vietnam, has recently developed strongly, but businesses providing online game services have not had to pay or have not paid enough tax commensurate with their revenue.
Vietnam is currently one of the most exciting markets of the global game industry when there are 5 representatives in the top 10 largest game publishers in Australia, New Zealand and the whole Southeast Asia region. Vietnamese game companies ranked 7th in the ranking of the most downloaded games in the world. According to statistics, for every 25 games downloaded on game platforms, there will be one game produced by a Vietnamese company.
Accordingly, the Ministry of Finance proposes to research and add the type of “online video game service business” to the subject of special consumption tax with a reasonable tax rate to effectively manage this type of service.
However, at the seminar ‘Online video game service enterprises commenting on the proposal to develop the draft Law on Special Consumption Tax (amended)’, many online video game service businesses have expressed support for the proposal, but there are concerns remain about specific tax rates for different types of services.
Clause 1, Article 31 of Decree No. 72/2013/ND-CP stipulating that online video game services will be classified into categories from G1 to G4 (total 4 categories) based on the interaction between players and the server system and player interaction with other players.
Thereby, businesses want to have detailed data on the special consumption tax rate for each type of video game business service in Vietnam, thereby making more detailed comments and opinions to ensure effective control of the video game business, contribute to the state budget revenue, but still have room for this business to continue to thrive in Vietnam, avoiding the situation of imposing tax too tightly.
With appropriate control, Vietnam’s video game industry will have a reasonable level of development, ensure competitiveness and bring Vietnamese video game style to the world, limiting dependence on foreign applications and international game companies which are difficult to control, such as the problems related to the recent Tiktok application in the world.
Proposed tax on sugary beverages
Some note worthwhile contents in the Draft Law on Special Consumption Tax of 2023 in Vietnam is the proposal to impose special consumption tax for the beverage industry include sugary beverages, barley beverages and non-alcoholic beverages and the proposal to continue to increase the special consumption tax rate for alcohol and beer products.
According to the Ministry of Finance, the main reason for the proposal to impose a special consumption tax on sugary beverages, which are facing many subjections, is to control obesity, overweight and related diseases in Vietnamese society because the sugar content in alcoholic beverages has a direct impact on the above diseases.
However, many experts in the business world of Vietnam as well as the people, citizens have expressed strong opposition to this proposal, because it has no scientific and practical basis to prove a direct relationship between the sugary beverages and diseases as proposed by the Ministry of Finance or a basis for affirming that the imposition of tax will have the effect of reducing overweight and obesity situations as proposed when Vietnamese society currently has many other sugary products, high in calories but not taxed.
In addition, the tax on sugary beverages, barley beverages and non-alcoholic beverages will also have a negative impact on businesses that produce sugary beverages, barley beverages and non-alcoholic beverages as well as the consumers who use those products. Because when the consumption tax is imposed, businesses are forced to increase the cost of products sold to the end-consumers and thereby, affect people’s expenditures.
If this proposal is approved, both the beverage industry and the people who are struggling to recover from the pandemic will face an additional financial burden, seriously affecting the development of the economy.
It is for the above reasons that many businesses have simultaneously proposed to the Ministry of Finance to remove sugary beverages, barley beverages and non-alcoholic beverages from the draft special consumption tax at the conference on ‘Beverage industry comments on the proposal to develop the draft Law on Special Consumption Tax (amended)’.
Also at the seminar co-organized by the Vietnam Chamber of Commerce and Industry (VCCI), many businesses also stated their opinions to reduce or not increase the special consumption tax imposed on alcohol and beer products. Currently, the alcohol and beer production industry in particular and the beverage and food industry in general are still facing difficulties regarding the source of raw materials. Therefore, it is recommended not to change the special consumption tax at this time.
Currently, the price of alcohol is increasing by over 10%, higher than Vietnam’s inflation rate of 4% in 2022 and higher than the per capita income of 9.5%, so the increase in consumption tax in the current stage is not suitable for the development of the economy.
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