Vietnam’s Hard Line on Soft Drinks

Vietnam isn’t being very hospitable to two of its most prominent American multi-nationals.  Starting next July, the finance ministry wants to impose a 10%  tax on carbonated soft drinks — which is to say Coke and Pepsi.

The rationale is these beverages are harmful to public health, just like other products consumers want — but which health officials don’t want them to have — like  cigarettes and alcohol.

The new tax is getting criticism from foreigners who are thinking more about profits than health.  A consultancy that focuses on global interests in Vietnam says the tax will hurt consumers and the local sugar industry, retail distribution system and retailers.

The American Chamber of Commerce, whose members include Coke, Pepsi, Miller beer, Philip Morris tobacco, Dow chemical and other companies that give Vietnamese health officials pause, calls the proposed tax unfair to consumers.

Meanwhile, Vietnamese officials aren’t in agreement with each other.  The Viet Nam Tax Consultancy Association favors the tax, but the Central Institute for Economic Management suggests it would be counterproductive — bringing in $8.4 million tax revenue but costing the beverage industry $41 million and Vietnam’s economy $12 million because demand for soft drinks would decline 28%.

The proposed tax is testing Vietnam’s Communist Party ideal of creating an enduring socially responsible free enterprise economy.  That won’t be easy to do as the country opens its door ever wider to the global marketplace.

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