Which items are subject to an excise tax?

Ministry of Finance will add an excise tax on products that are bad for health and the environment

One of the important contents of the revised Law on Excise Tax is to expand the tax base following the guidelines of the Party and State and in line with international practices. Specifically, the Ministry of Finance will add an excise tax on products that are bad for health and the environment and services with limited use following the guidelines of the Party and State, such as sugary drinks; barley and non-alcoholic beverages; new cigarettes and equipment, parts and solutions of new cigarettes; online video game services providers.

The Ministry of Finance made this proposal because, for sugary drinks, the World Health Organization (WHO) has officially recommended to the governments of countries to encourage people to have access to healthy food by imposing a tax on sugary drinks to drive consumption. As a result, countries have gradually added sugary drinks to the list of products subject to excise tax. Specifically, in 2012, there were only about 15 countries, but by 2021, at least 50 countries have collected excise tax on this item. For example, 6 out of 10 countries in ASEAN have collected excise tax on sugary drinks.

As for barley drinks and non-alcoholic beverages, the Ministry of Finance informed that in fact, there had been an import of non-alcoholic beverages produced under the same production process and materials, which is similar to beer products (after the fermentation process, alcohol is separated from the product and natural flavours are added). However, because of products without alcohol, it is not identified as beer according to the provisions of Law on Prevention and control of harmful effects of alcoholic beverages, the product meets national standard 12828:2019 on beverage enterprise declares the name and product standard as a barley drink. Therefore, they are not subject to excise tax under the current Law on Excise Tax.

However, several countries such as Thailand and India are currently studying to impose an excise tax on beer with an alcohol content of 0 between 14% and 22%. In Oman, beer with zero alcohol content is subject to 50% excise tax from October 1, 2020, after the country issued policies to expand the object of excise tax on barley and non-alcoholic beverages. Barley drink products have the same production process and ingredients as beer; the product's appearance is similar to beer. It still has the same characteristic taste as beer but is just different in name, and the price is approximately the same. So it can be considered a product similar to non-alcoholic beer. Therefore, the Ministry of Finance believed defining this item's consumption orientation is necessary.

In the revised Law on Excise Tax, the Ministry of Finance also proposed to impose an excise tax on new tobacco products and equipment, parts and solutions. According to the Ministry of Finance, several new tobacco products have appeared on the market today, such as electronic nicotine delivery systems (ENDS), heated tobacco products, and shisha using all, part or no tobacco materials, although these products are not allowed to be imported and traded in Vietnam yet.

According to WHO, the Ministry of Health and health protection organizations, ENDS, heated tobacco products and shisha all contain toxic ingredients that are contained toxic ingredients which are harmful to direct smokers and people around as traditional cigarettes. Smoking ENDS, heated tobacco products and shisha are forms of tobacco consumption. Therefore, based on Article 6 of the Framework Convention on Tobacco Control (FCTC), WHO has recommended that countries ban ENDs or take measures to control ENDs, limiting heated tobacco products and shisha. In case there are measures to control ENDS, heated tobacco products and shisha, it is recommended to apply the same tax policy as for ordinary cigarettes to ensure an increase in selling price and reduce demand for use to protect community health.

According to the Ministry of Finance, for electronic nicotine delivery systems (ENDs), there are 71 countries collecting excise tax. In particular, 23 countries apply absolute taxes, 7 countries apply percentage taxes, and the rest apply a mixture of both absolute and percentage taxes at the same rates. Overall, these countries impose taxes on ENDs at the same level as traditional cigarettes. As for heated tobacco products, 61 countries collect an excise tax on heated tobacco products at the same level as traditional cigarettes.

In addition, online games are a form of entertainment associated with the development of the internet, with the interaction between players and players and between players and servers of online game service providers through electronic devices such as personal computers, game consoles, and mobile devices. Currently, the type of game business is a product with large revenue and high profit compared to other types of business, attracting all ages of the population, especially young people to participate. Therefore, it is necessary to research to supplement the list of products subject to an excise tax to orient consumption.