Do you have to pay a special tax for drinking a cup of coffee?

The Ministry of Finance has proposed adding soft drinks, including carbonated and non-carbonated drinks, energy drinks, sports drinks, and packaged ready-to-drink tea and coffee, to the list of items subject to special consumption tax. The Ministry proposed two options: applying a tax rate of 10% or 20% starting in 2019.

Therefore, if this proposal is approved, instant tea and coffee will be classified as items subject to excise tax, along with cigarettes, cigars, alcoholic beverages, yachts, votive paper; karaoke businesses, massage parlors, casinos, etc.

Fear of obese people

Explaining the addition of these items to the list of goods subject to excise tax, Mr. Pham Dinh Thi, Director of the Tax Policy Department - Ministry of Finance, said: "The purpose is to conform with international practices and to guide the regulation of consumption of sugary drinks in order to protect people's health."

A representative from the Ministry of Finance further explained that sugary drinks are a popular beverage. However, consuming sugary drinks is associated with increased calorie intake, weight gain and obesity, and many other negative health effects including cardiovascular disease and diabetes.

Unrealistic

That is the general opinion of businesses, associations, and experts in Vietnam's coffee and tea industry when the Ministry of Finance included ready-to-drink tea and coffee under the special consumption tax regime, similar to tobacco and alcoholic beverages.

"A packet of instant coffee costs about 2,500 VND/packet. If an additional 10% - 20% excise tax is applied, I would have to spend an extra 250 - 500 VND/packet," calculated Mr. Dinh Quan, a resident of Thu Duc District (Ho Chi Minh City).

If a cup of coffee at a regular coffee shop costs around 20,000 VND, the owner will increase the price by 2,000-4,000 VND per cup to 22,000-24,000 VND. The reason is that when manufacturers have to pay a 10%-20% excise tax, they will increase the selling price to retailers and coffee shops. Thus, increased costs lead to higher prices for the coffee, ultimately harming the customer.

Mr. Nguyen Huu Tai, Chairman of the Vietnam Tea Association (Vitas), said: "It is completely illogical and incomprehensible that tea products, which are considered healthy beverages, are included in the group of goods subject to excise tax."

Coffee drinkers bear 2% of the tax.

Lawyer Tran Xoa, Director of Minh Dang Quang Law Firm, also stated that excise tax is a tax that manufacturers must bear. However, this tax is included in the selling price to distributors and retailers by the manufacturers. Distributors and retailers then increase the selling price of the product to the market. Thus, if coffee and tea are subject to excise tax, consumers will be paying double taxes by the time they reach the product.

Lawyer Xoa gave an example: if a kilogram of tea costs 100,000 VND, currently subject to a 10% value-added tax (VAT), the consumer pays 110,000 VND. However, with the proposal to increase the VAT to 12%, plus a 10%-20% special consumption tax, which businesses will factor into the selling price, consumers will ultimately pay 123,000-134,000 VND per kilogram for that tea product.

Mr. Do Ha Nam, Vice President of the Vietnam Coffee and Cocoa Association (Vicofa), analyzed: Packaged coffee products use domestically produced coffee beans, unlike the beer, wine, and soft drink industries, which mainly use chemical ingredients and must import them. Therefore, coffee should be removed from the group of goods subject to excise tax.

Compiled from VNN