Potential to Increase State Budget Revenue by Amending the Law on Pro-Health Excise Tax in Vietnam

In 2020, the Government of Vietnam approved its comprehensive National Finance Strategy for 2021– 2025, with a vision toward 2030 to increase revenue and meet its growing social sector needs. Currently, 4 percent of government revenue is raised through excise taxes, including pro-health excise taxes. The law covering these pro-health taxes is presently being amended by the Ministry of Finance, providing an opportunity to explore how raising/reforming these taxes could increase revenues.

This report recommends that the government raise pro-health excise taxes at greater rates than currently proposed by the Ministry of Finance in order to increase the revenue raised. Furthermore, the report suggests that the tax structure be modified from an ad valorem-only to a mixed structure to increase revenue and help limit manufacturers’ opportunities to mitigate the impact of tax-induced price increases on consumption. The report:

• Reviews the current regulatory framework of pro-health excise taxes in Vietnam;
• Discusses different scenarios for increasing existing pro-health excise taxes on tobacco and alcohol and implementing a new pro-health excise tax on sugar-sweetened beverages; and
• Proposes potential strategies for implementing current and new pro-health excise tax policies.