The amended law on special consumption tax is to be presented at the eighth sitting of the National Assembly (NA) next month, with an aim to raise tax on tobacco, wine and beer, said NA Vice Chairwoman Nguyen Thi Kim Ngan.
Speaking at the NA Standing Committee’s meeting on September 25, Ngan said the draft amended law prepared by the Ministry of Finance is now qualified to be tabled at the next NA sitting.
Tong Thi Phong, another NA vice chairwoman, shared Ngan’s opinion, saying “we should pass the law at the coming session and back the Government’s proposal (on the amended law).”
As proposed by the Government, the special consumption tax rates on tobacco, beer and wine should be increased as the use of such products is not encouraged.
The new rates to be imposed on tobacco are expected to be raised to 70% from 65% from early 2016 and 75% from 70% from early 2019. Meanwhile, beer may see its tax rates go up five points to 55% from July 2015, 60% from January 2017 and 65% from January 2018.
Besides, a rate of 65% instead of 50% may be slapped on wine whose alcohol by volume is over 20%, and wine with alcohol by volume under 20% will be subject to a 35% rate, up ten percentage points from the current levels.
The NA Finance and Budget Committee not only advocates the draft law but also wants the road map for tax increase to take place sooner.
Head of the Finance and Budget Committee Phung Quoc Hien said the tax increase would not leave a negative impact on business operations of domestic firms but helped increase budget revenue considerably and reduce the number of smokers.
However, many said there should be a cautious approach to the tax hike. According to NA Vice Chairman Uong Chu Luu, though the higher special consumption tax rate on tobacco helps the State budget collect an additional VND4 trillion, it is still necessary to evaluate how such tax rise impacts domestic tobacco companies and growers.
According to Deputy Minister of Industry and Trade Do Thang Hai, the Government has carefully taken this issue into account, considering that if the new rate is high, it will trigger more tobacco smuggling and cause budget revenue losses. Tobacco smuggling causes a loss of around VND6.5 trillion each year to the State coffer.
However, Minister of Finance Dinh Tien Dung said higher tax rates did not necessarily fuel smuggling. Dung also admitted that the use of tobacco, wine and beer can be restricted by high tax rates.
The amended law on special consumption tax is expected to be passed at the next NA sitting and become effective in mid-2015.