According to a Ministry of Finance draft amendment to the tax laws, carbonated drinks would be subject to a special consumption tax rate of 10%, while VAT would increase from 10% to 12% for all kinds of beverages, and from 5% to 6% for sugar.
Such amendments could lead to a rise of 12% or more on soft drink prices. As a result, there would be a significant decline in beverage consumption and revenue, manufacturers claim.
To offset this, beverage companies could narrow production, resulting in lower corporate income tax revenues.
Small and medium enterprises would be affected the most by tax law amendments.
The US-Asean Business Council, which represents a number of beverage businesses, has urged the finance ministry to consider instead either a tax of just 1-3% on all kinds of sugary foods and beverages, or to impose a special consumption tax just on highly sweetened carbonated drinks.
The Ministry of Finance is currently conducting an assessment report on the potential impact of the draft law on the beverage industry, the economy and consumers.
Nguyen Van Viet, chairman of the Vietnam Beer, Alcohol and Beverage Association, said a sugar tax was unnecessary.
“Many populous countries like China have not imposed special consumption tax on carbonated drinks to avoid negative impacts on the beverage industry and the state budget. So there is no reason for Vietnam to do so,” Viet said.
He pointed out that hundreds of beverage businesses contribute nearly VND50tr (US$2.2bn) to Vietnam's economy and create hundreds of thousands of jobs.