Vietnam to Raise Special Consumption Tax on Cigarettes, Beer, and Spirits

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HCMC – Vietnam’s National Assembly Standing Committee (NASC) has announced that the special consumption tax (SCT) on cigarettes, beer, and spirits (a “sin tax”) will be raised on January 1, 2016. SCT is a form of excise tax that applies to the production or importation of specific goods and to certain services.

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The tax raises will be implemented using the following schedule:

  • Tobacco products (current tax rate of 65 percent):
    • 70 percent tax from January 1, 2016
    • 75 percent tax from January 1, 2018
  • Beer (current tax rate of 50 percent):
    • 55 percent from January 1, 2016
    • 60 percent from January 1, 2017
    • 65 percent from January 1, 2018
  • Wine under 20 percent proof (current tax rate of 25 percent):
    • 35 percent from January 1, 2016 (not finalized yet)
  • Wine over 20 percent proof and spirits (current tax rate of 50 percent):
    • 65 percent from January 1, 2016 (not finalized yet)

The tax on tobacco products, particularly on cigarettes, is aimed at reducing the level of smoking in the country. Vietnam has a high number of smokers, over 15 million, and is struggling to deal with the associated health problems that come along with smoking.  According to Vietnam’s Ministry of Health, tobacco-related illnesses kill 40,000 people each year in the country, a number which is expected to rise to 70,000 per year by 2030. Of course, the tax will also have the added benefit of increasing the state’s coffers – the new tax is expected to contribute more than VND 2.9 trillion (US$136.5 million) in taxes in 2015 and VND 7.7 trillion (US$362.4 million) in 2018.

The taxes on alcohol are also in response to what the government sees as the increasing harm caused by excessive drinking throughout the country – Vietnam consumes the third largest amount of beer in Asia, behind only China and Japan. An additional reason for the tax is to help boost state budget income.

However, a potential problem caused by the increase in taxes is the associated rise in the smuggling of counterfeit products into the country; the government is currently mulling potential countermeasures to this issue.

SCT snapshot

SCT is levied on the production and importation of 11 categories of products and six types of services which are considered to be luxurious or non-essential. Generally, goods and services subject to SCT are also subject to VAT. The basis of VAT calculation is the selling price plus the SCT. For imported products, VAT is imposed on the dutiable value plus import duties plus SCT.

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