Increasing the SCT would cause the prices of imports to increase sharply, leading to cases of tax evasion, smuggling and counterfeit alcoholic beverages. In the picture, the Goverment officials are seizing a large amount of smuggled alcohol. — Photo dantri.vn

HCM CITY (Biz Hub) — The Viet Nam Beer and Alcoholic Beverages Association (VBA) has recently sent official documents to authorities, petitioning on new Decree 108/2015/ND-CP, which guides articles of the Law on Special Consumption Tax (SCT) issued in 2008 and the amended Special Consumption Tax Law issued in 2014.

VBA said the documents were sent to the Government, Ministry of Finance, Ministry of Justice and Viet Nam Chamber for Commerce and Industry (VCCI) after the association had collected ideas from its members.

The association said it believed that the new decree was not in compliance with the current Special Consumption Tax Law. It would also have negative effects on companies' business plans and operations.

The association warned that the new decree could lead to an increase in counterfeit alcohol and smuggled alcohol as well as negative sentiment among investors.

In particular, VBA explained that article 6.2 of the SCT law issued in 2008 stipulated that the special consumption tax for imported goods was "the price used to calculate import duties plus the import duty."

The amended SCT Law issued in 2014 only stipulated increased SCT rates, it said.

However, Decree 108, which was issued to guide the amended SCT Law issued in 2014 based on the SCT law issued in 2008, states in article 4.1 that "[the special consumption] taxable price of imported goods [other than gasoline] is the resale price of the importer."

Relating to the business plan, VBA said the decree could adversely affect beer and wine importers.

"Article 7 of Decree 108 regulates SCT deduction of import taxes, but the new tax base under the decree would result in a 60 per cent to 150 per cent increase in SCT liabilities."

"This, coupled with the 15 per cent increase in SCT in the Law No 70/2014/QH13, would cause product prices to increase too much when the decree takes effect in 2016. When setting up long-term and short-tem business plans, businesses have to rely on the current regulations. Therefore, these changes would cause a big difficulty for businesses, and could even cause them to cease operating," VBA said.

The association added that the new tax base also would cause difficulties in the SCT balance of importers. In reality, importers cannot and must not control the resale price of independent trade, in accordance with the Competition Law. The new SCT base, with an aim to collect tariffs in the most efficient way, would face difficulties in enforcement as well as compliance of the Competition Law.

VBA pointed out that experience from other countries has shown that increasing the SCT may lead to an increase of money to the State budget. In the long term, however, this would cause the prices of imports to increase sharply, leading to cases of tax evasion, smuggling and counterfeit alcoholic beverages.

In another development, the European Committee of Vine Enterprises has also sent its petition to the Government and National Assembly, showing their concerns about the new law.

In addition to petitioning that the new decree is not consistent with the law, the committee said: "We acknowledge that a draft version of Decree 108 was posted for public comment earlier this year. However, it did not mention the change in the tax base for imported alcoholic beverages. Therefore, we were not in a position to provide meaningful input to this unprecedented change in the tax base."

It also said that if the decree takes effect in 2015, there would be significant negative impact on European importers of wine and spirits to Viet Nam.

Based on these points of view, as well as the condition of the new draft law, which was amended and added to the SCT law (the source for Decree 108, which has yet to be approved by the National Assembly), the association and its members propose that the effective date of Decree 108 should be postponed to at least January 1, 2017. This would give enterprises one year for preparation.

This would be an essential time for enterprises to adapt to changes in macro policies and to work with partners and distributors, VBA said.