Mixed tobacco excise regime recommended at conference | Company

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Nguyen Thi Cuc, president of the Association of Tax Consultants of Vietnam, speaks at a conference held in Hanoi to discuss the increase in taxes on tobacco products. (Photo: VNS)

Hanoi (VNS/VNA) – A mixed excise duty with an adapted roadmap is a reasonable way to increase the special consumption tax on tobacco, a conference entitled “Special consumption tax – Harmonize the State budget and business development” heard in Hanoi.

The conference, recently jointly organized by the Vietnam Tax Consultants Association (VTCA) and the Vietnam Chamber of Commerce and Industry (VCCI), sought to gather the opinions of experts and entrepreneurs to achieve the objectives of government decision 508/QD-TTg published in April 2022 on tax reforms by 2030.

The conference learned that there are three types of tobacco tax regimes around the world: the ad valorem tax structure by a percentage on the taxable price (factory or retail price) of the products; the specific tax structure (ie a fixed tax amount per unit of goods); and the mixed tax structure (ie a combination of ad valorem percentage tax and specific tax).

The specific tax is the most popular of the three with 66 countries adopting it, followed by the mixed tax (61 countries) and the ad valorem tax (47).

“The ad valorem excise has many limitations,” said Le Thi Thuy Van, deputy director of the Finance Ministry’s Institute for Financial Strategy and Policy, pointing out that this approach has not kept pace with the pace of change. inflation and encouraged the proliferation of cheap cigarettes. on the market.

For Vietnam, which uses ad valorem, she recommended the mixed tax structure.

“The tax increase under the mixed tax structure needs a roadmap to ensure that over the years it matches inflation.”

Dinh Thi Quynh Van, managing director of PwC Vietnam, said the ad valorem tax does not promote investment in production or help improve product quality due to higher production costs.

This leads to higher selling prices and companies have to bear a heavier tax burden due to the multiplier effects of the ad valorem structure, she said, suggesting that there is a need to reform the tax structure in the meaning to encourage quality improvement in order to reduce the harmful effects on health by moving to mixed taxation and using the specific tax to properly regulate the consumer market.

Speaking of timing, experts agreed that a proper roadmap is needed to ensure that government revenues will not be affected, producers will have enough time to stabilize their operations and tobacco smuggling will be prevented.

Nguyen Thi Cuc, president of the VTCA, told the conference that the increase in taxes on
the tobacco products should follow a proper roadmap so that companies can adjust their operations and production does not suffer.

A proper roadmap will also contribute to the smooth collection of government revenue, prevention of revenue loss and limitation of cigarette smuggling while contributing to the protection of public health, she said.

Young Jae Song, general manager of BAT – Vinataba Joint Venture Company, approved the adoption of the mixed taxation method.

But the government is not expected to increase the excise tax over the next two years, he said.

“He must establish a reasonable roadmap with an appropriate increase to avoid shock increases that destabilize the market and business environment and stimulate cigarette smuggling and cause social security problems.”

The participants agreed that a tobacco tax increase is necessary, but in the process of drafting the amendments to the law, it is necessary to carefully and thoroughly study the roadmap and the increases so that the policy taxation ensures harmony in the following areas: regulating the revenue budget, protecting public health, reducing cigarette smuggling and stabilizing production and business./.

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