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FOREIGN TRADE UNIVERSITY HO CHI MINH CITY CAMPUS

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MID-TERM PROJECT

FUNDAMENTALS AND PRACTICE OF


VIETNAM’S TAX LAWS:
SPECIAL SALE TAX

Lecturer

Mrs. Tran Nguyen Chat

HCMC, October 2019

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List of members

Name Student code

Nguyễn Hồng Nhung 170101

Trần Thị Tú Uyên 1701015987

Tô Phương Uyên 1701015985

Trương Triệu Vĩ 1701016009

Đỗ Quang Vinh 1701016014

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Contents
1. INTRODUCTION:........................................................................... 1
1.1. Definition: ................................................................................... 1
1.2. Motivations underlie the use of most Special Sales Tax: ....... 1
1.3. Advantages & Disadvantages: .................................................. 1
1.4. How an Excise Tax Works? ...................................................... 2
2. FUNDAMENTALS OF VIETNAM’S SPECIAL SALE TAX .... 3
2.1. Vietnam law ................................................................................ 3
2.1.1. Taxable objects .......................................................................... 3
2.1.2. Non-taxable objects ................................................................ 5
2.1.3. Taxpayers ................................................................................ 6
2.1.4. Tax bases ................................................................................. 6
2.1.5. Tax price .................................................................................. 6
2.1.6. Tax rates .................................................................................. 8
2.1.7. Tax refund, deduction, reduction ....................................... 12
2.2. Reasons for amending special sale duty from 2008 to 2014 . 12
2.2.1. Cigarettes, cigars, and other products derived from
tobacco plants .............................................................................................. 13
2.2.2. Alcohol ................................................................................... 14
2.2.3. Beer ........................................................................................ 14
2.2.4. Casino business, electronic casino game business ............. 15
2.2.5. Cars ........................................................................................ 16
3. PROPOSAL FOR CURRENT SPECIAL SALE TAX IN
VIETNAM.......................................................................................................... 17
3.1. Taxable objectives .................................................................... 17
3.1.1. Gasoline of all kinds, naphtha, reformade component and
other components for mixing gasoline: ..................................................... 17
3.1.2. Cars ........................................................................................ 18
3.1.3. Air conditioning items .......................................................... 19

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3.1.4. Add some goods and services to the taxable objectives .... 19
3.2. Interaction with other taxes .................................................... 21
4. SPECIAL SALES TAX IN PRACTICE ...................................... 21
4.1. Calculation of Special Sales Tax ............................................. 21
4.2. Factors affecting the enforcement of Special Sales Tax in
Vietnam 24
4.2.1. Objective factors ................................................................... 24
4.2.2. Government Direction ......................................................... 25
4.3. Results of the enforcement of Special Sales Tax in Vietnam25
4.3.1. Directing the social expenditure and more equally
redistributing the income of the society .................................................... 26
4.3.2. Stabilizing and increasing the government budget ........... 27
4.3.3. Giving incentives to the production of targeted products 28
4.4. Limits of the enforcement of Special Sales Tax in Vietnam 29
4.4.1. Ineffective tax supervising agencies leads to tax evasions 29
4.4.2. Ineffective tax administrative systems ............................... 31
4.4.3. Ineffective tax inspecting and punishing mechanism ....... 31
5. CONCLUSION: ............................................................................. 31
REFERENCE .......................................................................................... 33

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1. INTRODUCTION:
1.1. Definition:
Special Sales Tax is a form of excise tax that applies to the production or import
of certain goods and the provision of certain services. Imported goods (except for
various types of petrol) are subject to SST at both the import and selling stages. For
example: One of the ways that President Barack Obama’s Affordable Care Act (ACA)
is meant to lower health care costs is by levying various excise taxes across health-
related expenses. One of these excise taxes is on so-called “Cadillac” insurance plans,
which are health insurance plans that have unusually high premiums. The law defines
such plans as those with premiums that cost over $10,200 for an individual and
$27,500 for a family, and charges insurers 40% in taxes for every dollar above those
amounts. When the Cadillac tax goes into effect, the revenue generated is intended to
pay for coverage for those who can’t afford insurance while discouraging insurers
from raising premiums too high.
1.2. Motivations underlie the use of most Special Sales Tax:
The first is revenue generation: excise taxes can produce significant
government revenues, and may do so at lower political or economic cost than
alternatives such as income taxation. The second motivation is application of the
benefit principle of taxation: excise taxes can be tailored to impose tax burdens on
those who benefit from government services financed by excise taxes. Gasoline taxes
are often justified as user fees for government-provided roads, and the tax on sonar
devices is justified by government expenditures to maintain lakes and fisheries. The
third motivation is control of externalities, which is the goal of a number of excise
taxes on polluting substances, such as taxes on ozone-depleting chemicals. And the
fourth motivation is that excise taxes may discourage consumption of potentially
harmful substances (such as alcohol and tobacco) that individuals might overconsume
in the absence of taxation.
1.3. Advantages & Disadvantages:

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Excise taxes have their advantages and disadvantages, from the point of view of
social justice.
The advantages include:
- They have significant revenue potential.
- The revenue is relatively easy to collect.
- They can be used to generate behaviour change for wider social and
environmental objectives, e.g. concerning public health.
The disadvantages include:
- They may be highly regressive.
- Excise taxes on fuel may increase the price of this essential item (and
other items too, because of increased transport costs) beyond the reach of
poor people, if there are no exemptions.
- Price differences may promote smuggling from neighbouring countries
that do not levy these taxes. This risk is particularly cited for alcohol and
cigarettes.
1.4. How an Excise Tax Works?

Federal, state, and local governments have the authority to institute excise
taxes. While income tax is the primary revenue generator for federal and state
governments, excise tax revenue also makes up a small portion of total revenue.

Excise taxes are primarily a business tax, separate from other taxes a business
must pay, like income taxes. Businesses charging and receiving excise taxes are
required to file Form 720 Federal Excise Tax.

Return on a quarterly basis and include quarterly payments. Business collectors


of excise taxes must also maintain their obligations for passing on excise taxes to state
and local governments as required. Merchants may be allowed deductions or credits on
their annual income tax returns related to excise tax payments.

Excise taxes can fall into one of two categories: ad valorem and specific. Ad
valorem excise taxes are fixed percentage rates assessed on particular goods or

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services. Specific taxes are fixed dollar amounts applied to certain purchases. In some
cases, governments levy excise taxes on goods that have a high social cost, such as
cigarettes and alcohol, and for this reason, these taxes are sometimes called sin taxes.
Overall, the largest revenue-producing excise taxes in the U.S. come from motor fuel,
airline tickets, tobacco, alcohol, health-related goods, and health-related services

Ad Valorem Excise Taxes: Ad valorem is a Latin phrase that literally means


"according to value." An ad valorem tax is charged by percentage. This results in an
excise tax that is based on the value of the product or service. For example, the IRS
levies a 10% excise tax on indoor tanning services. This means that if a tanning salon
charges $100 for a tanning session, it must pay the IRS $10 in excise tax. Similarly, if
the company charges $200 for tanning, it must pay a $20 excise tax. Other types of ad
valorem excise taxes include firearms (10%), airline tickets (7.5%), and heavy trucks
(12%). Property taxes can also be considered a type of ad valorem excise tax.

Specific Excise Taxes: Specific excise taxes are a set tax or fee added to a
certain product on a per-unit basis. Some examples of federal, specific excise taxes
include cigarettes ($1.01 per pack of 20), pipe tobacco ($0.1769 per one ounce), beer
($3.50 for the first 60,000 barrels), cruise ship passengers ($3 per passenger), and
gasoline ($0.184 per gallon). Often sin taxes on targeted goods like beer and alcohol
will be taxed at the federal level and also taxed heavily by the state, making the cost of
these items higher. For example, New York has a specific excise tax of $4.35 per
cigarette pack of 20. Combining this with the federal tax of $1.01 makes the excise
taxes alone $5.36. These taxes have a considerable impact on the consumer.

2. FUNDAMENTALS OF VIETNAM’S SPECIAL SALE TAX

2.1. Vietnam law

2.1.1. Taxable objects

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Goods Cigarettes, cigars and other tobacco preparations used for smoking,
inhaling, chewing, sniffing or keeping in mouth

Liquor

Beer

Under-24 seat cars, including cars for both passenger and cargo
transportation with two or more rows of seats and fixed partitions between
passenger holds and cargo holds

Two-and three-wheeled motorcycles of a cylinder capacity of over 125cm3

Aircraft and yachts

Gasoline

Air-conditioners of 90,000 BTU or less

Playing cards

Votive gilt papers and votive objects

Services Dance halls

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Massage parlors and karaoke bars

Casinos; prize-winning video games, including jackpot and slot games and
games on similar machines

Betting

Golf business, including the sale of membership cards and golf playing
tickets

Lottery business

2.1.2. Non-taxable objects

Goods specified in 2.1.1 (taxable objects) are not subject to excise tax in the
following cases:

- Goods which are directly exported by producers or processors, or which


are sold or entrusted by these producers or processors to other business
establishments for export;
- Imported goods, including:
+ Goods as humanitarian aid or non-refundable aid; gifts for state
agencies, political organizations, socio-political organizations, socio-
political-professional organizations, social organizations, socio-
professional organizations or people’s armed forces units; and donations
or gifts for individuals in Vietnam within the quotas prescribed by the
Government;

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+ Goods transited or transported via Vietnamese border gates or borders,
and goods transported to and from border gates under the Government’s
regulations;
+ Goods temporarily imported for re-export and temporarily exported for
re-import which are not subject to import duty or export duty within the
time limit specified in the law on import duty and export duty;
+ Personal effects of foreign organizations and individuals within
diplomatic immunity quotas; personal belongings within duty-free
luggage quotas; and goods imported for duty-free sale under law;
- Aircraft, yachts used for transport of goods, passengers, tourists, and
aircraft used for national defense and security purposes;
- Ambulances; prison vans; hearses; cars designed with both seats and
standing places for transporting 24 or more people; cars running in
recreation, entertainment and spoils areas which neither are registered
for circulation nor move on roads;
- Goods imported from abroad into non-tariff areas, goods sold from the
inland into non-tariff areas for use only in non-tariff areas, and goods
traded between non-tariff areas, except under-24 seat cars.
2.1.3. Taxpayers
Excise taxpayers include producers and importers of goods and providers of
services which are subject to excise tax. Exporters that purchase excise tax-liable
goods from producers for export and do not export but sell them domestically shall pay
excise tax
2.1.4. Tax bases
Excise tax bases include the taxed price of a taxable goods or service and the
tax rate. The payable excise tax amount is the excise taxed price multiplied by the
excise tax rate.
2.1.5. Tax price

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Taxable prices of goods/services are selling prices of goods services exclusive
of special excise tax, environmental protection tax, and VAT, and are prescribed as
follows:

Goods Domestic products The selling price set by the producer

Imported goods The import-duty calculation price plus the import


duty
(For imported goods eligible for import duty
exemption or reduction, it is exclusive of the
exempted or reduced import duty amount)

Processed goods The taxed price of the goods sold by processing-


ordering establishment or the selling price of the
product of the same or similar kind at the same time
with the time of goods sale

Sold on installment The one-off selling price of such goods, exclusive


or deferred payment of the installment or deferred payment interest

Services Golf business the selling price of the membership card or golf-
playing ticket, inclusive of the golf playing charge
and deposit (if any);

Casino Prize-winning video game and betting business, it


is the turnover from such business minus the prize
already paid to customers;

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Dance hall, massage The turnover from such business.
parlor and karaoke
bar business

For goods and services used for barter, internal consumption or donation, it is the
excise taxed price of the goods or service of the same or similar kind at the time of
barter, internal consumption or donation.

2.1.6. Tax rates

Goods Cigarettes, cigars, and other products derived from


75
tobacco plants

Alcohol a) Alcohol with ABV ≥ 20o 65

b) Alcohol with ABV < 20o 35

Beer 65

Cars having a) Passenger cars having 9 seats or fewer,


fewer than except for those in Points dd, e, and g in this
24 seats Table

Of a cylinder capacity not exceeding 2,000


45
cm3

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Of a cylinder capacity exceeding 2,000 cm3
50
but not exceeding 3,000 cm3

Of a cylinder capacity exceeding 3,000 cm3 60

b) Passenger cars having 10 – 15 seats ,


except for those in Points dd, e, and g in this 30
Table

c) Passenger cars having 16 – 23 seats ,


except for those in Points dd, e, and g in this 15
Table

d) Cars used for both passenger and cargo


transport, except for those in Points dd, e, and 15
g in this Table

dd) Car running on both gasoline and 70% of tax


electricity or bioenergy, the proportion of rates
gasoline does not exceed 70% of total energy applied to
used. the same
types of
cars in
Points a, b,
c, and d in
this Table

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e) Cars running on bioenergy 50% of tax
rates
applied to
the same
types of
cars in
Points a, b,
c, and d in
this Table

g) Cars running on electricity

Passenger cars having 9 seats or fewer 25

Passenger cars having 10 – 15 seats 15

Passenger cars having 16 – 23 seats 10

Cars for transport of both people and goods 10

Motorcycles, motor tricycles of a cylinder capacity


20
exceeding 125 cm3

Aircraft 30

10
yacht 30

Gasoline a) Gasoline 10

b) E5 gasoline 8

c) E10 gasoline 7

Air conditioners not exceeding 90,000 BTU 10

Playing cards 40

Votive papers 70

Services Dancing club business 40

Massage, karaoke business 30

Casino business, electronic casino game business 35

Betting business 30

Golf course business 20

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Lottery business 15

2.1.7. Tax refund, deduction, reduction

Excise taxpayers may have the paid tax amounts refunded in the following
cases:

- Goods temporarily imported for re-export:


- Goods which are raw materials imported for export production and
processing;
- Finalization of overpaid tax amounts upon merger, consolidation,
separation, split-up. dissolution, bankruptcy, ownership change,
enterprise transformation or operation termination;
- Upon issuance of tax refund decisions by competent agencies under law.
and cases of excise tax refund under treaties to which the Socialist
Republic of Vietnam is a contracting party.

Taxpayers that produce excise taxable goods from raw materials for which
excise tax has been paid and that can produce lawful documents on tax payment may
have the tax amounts paid for raw materials deducted upon the determination of
payable excise tax amounts at the stage of production.

Taxpayers that produce excise taxable goods and face difficulties caused by
natural disasters or unexpected accidents are entitled to tax reduction. The tax
reduction level shall be determined based on the actual extent of damage caused by
natural disasters or unexpected accidents but must neither exceed 30% of the payable
tax amount in the year the damage occurs nor exceed the balance between the value of
damaged assets and the received compensation (if any).

2.2. Reasons for amending special sale duty from 2008 to 2014

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In our country, the precursor to the current special sale tax is the commodity
tax, issued in 1951. In 1990, the Ministry of Finance drafted a new tax law project,
changed the term of commodity tax into special sale tax and was approved by the
National Assembly on June 30, 1990. Later, it was amended and supplemented at the
3rd session of the 9th National Assembly and passed on July 5, 1993. In October 1995,
the Law on Special Sale Tax was amended and supplemented again. In order to
promote the role of special sale tax in regulating production, social consumption,
regulating consumer income for the state budget in a reasonable manner, strengthening
the management of production and business for a number of goods and services; On
May 20, 1998, the National Assembly passed the Special Sale Tax Law and took effect
as from January 1, 1999, replacing the 1990 Special Sale Tax Law and two
amendments and supplements in 1993 and 1995. The National Assembly then issued
08/2003/QH11 law to amend the 05/1998/QH10 special sale tax law. On November
14, 2008, the National Assembly promulgated Law No. 27/2008/QH12 taking effect
from April 1, 2009 to completely replace the 08/2003/QH11 law and the
05/1998/QH10 amendment law. On November 26, 2014, the National Assembly
continued to promulgate Law No. 71/2014/QH13 effective from January 1, 2016,
amending and supplementing a number of articles of the 27/2008/QH1 law.
2.2.1. Cigarettes, cigars, and other products derived from tobacco plants

According to the World Health Organization (WHO), tobacco is one of


the leading causes of morbidity and mortality in the world. The use of tobacco
causes 25 different diseases, such as lung cancer, laryngeal cancer, oral cavity
cancer, skin cancer, cardiovascular diseases, etc.

Vietnam is among the 15 countries with the highest number of smokers in


the world. According to the 2010 Global Survey on Tobacco Use in Adults
(Over 15) in Vietnam (GATS): The proportion of smokers aged 15 and older is
47.4% for men gender, 1.4% for women and the overall smoking rate is 23.8%
(equivalent to 15.3 million people); Currently, 67.6% of non-smokers

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(equivalent to about 33 million people who are passive smokers at home and
49% of non-smokers (equivalent to about 5 million) who are passive smokers at
work housework.

The high percentage of smokers in Vietnam has many reasons, including


low retail prices of cigarettes, and easy access for teenagers. Currently, Vietnam
has a low tax-to-retail tax rate of 44.9% while that of retail countries in the
region is: Brunei 81%, Thailand 70%, Sing- Singapore 69%, Malaysia 57%,
Indonesia 51%, Myanmar 50%; and developed countries in Australia: 62%,
Germany: 75%, France 80% ...

Stemming from the above-mentioned contents, increasing Special sale tax


on tobacco products is necessary to reduce the percentage of smokers to protect
the health of everyone.

2.2.2. Alcohol

Before April 1, 2009, excise tax on wines is distinguished by type of


liquor as follows: liquor of 40 degrees or more 65%; alcohol from 20 to under
40 degrees 30% and alcohol below 20 degrees, fruit wine, medicinal alcohol
20%. Implementing commitments when joining the WTO, the National
Assembly passed the Special Sales Tax Law No. 27/2008 / QH12 stipulating:
Alcohol of 20 degrees or more applies 45% from January 1, 2010 to the end of
December 31 / 2012 and 50% from January 1, 2013; alcohol below 20 degrees
applies 25% from January 1, 2010.

The reduction of Special sale tax rate on liquor products has increased
purchasing power for this product. At the same time, alcohol abuse is harmful to
health, in addition to being one of the causes of many other social problems.

2.2.3. Beer

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Before January 1, 2010, excise tax on beer is distinguished by type of
beer: bottled beer, canned beer, which is subject to the 75% tax rate minus the
value of bottles and cans; draft beer, draft beer has been applied 30% in 2006,
2007 and 40% since 2008. Implementing the requirements of joining the WTO,
the National Assembly passed the Special Sale Tax Law No. 27/2008 / QH12
stipulating uniform application The tax rate for all types of beer is 45% from
January 1, 2010 to December 31, 2012 and 50% from January 1, 2013. The
agreement on the tax rate to fulfill the commitment to reduce the tax rate on
bottled beer from 75% to 45% - 50% is to support local breweries (the structure
of draft beer accounts for a large proportion) restructuring production,
improving product quality to be competitive, thereby contributing to stabilizing
jobs for working people, ensuring social security.

The reduction of tax rates on beer products has increased purchasing


power (consumption) for beer. In 2013 alone, the amount of beer consumed was
3 billion liters and per capita was 32 liters / person. According to the
development planning of Vietnam's beer, wine and beverage industry up to
2015, with a vision to 2025 approved by the Ministry of Industry and Trade: in
2010 production output will reach 2.5 billion liters of beer; By 2015, the
production output will reach 4 billion liters of beer; By 2025, production will
reach 6 billion liters of beer.

The misuse of beer has harmed the health of the people, in addition to
being one of the causes of many other social problems such as social disorder
and disorder, crime and traffic accidents. Stemming from the aforementioned
reality and to limit the beer misuse and in accordance with the Prime Minister's
Decision, it is necessary to adjust the Special sale tax rate increase for this item.

2.2.4. Casino business, electronic casino game business

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Under the provisions of Article 3 and Article 23 of the Law on Personal Income
Tax (PIT), the income from winning prizes or betting, casinos is taxable income with
the tax rate of 10% on the winning income. Bonus over 10 million. In fact it is
impossible to determine the winning amount. Based on the experience of other
countries and territories, no personal income tax will be collected for individual
casinos (Singapore, Philippines, Laos, Malaysia and Macao). ...). At the same time, the
management mode of the casino is very tight, the tax office directly supervises cash
collection activities, gaming machines connected with the tax authority; The taxable
income of an enterprise is specifically determined on the revenue due to the fact that it
is not possible to distinguish the taxable expenses of the casino business from other
activities. The Government issued Resolution No. 63 / NQ-CP on August 25, 2014,
with contents expected to be submitted to the National Assembly to eliminate PIT for
canoe players, and at the same time assign the Government to direct tax authorities.
supervise, directly manage sales, and stipulate the ratio that sets the rate of CIT on
sales.
In order to ensure consistency with the above amendments, it is necessary to
increase the Special sale tax rate for canoeing business.
2.2.5. Cars
WTO Commitment: All types of cars must reduce import tax rates from 100%
to 70% after 7 years from accession (2014). Particularly for passenger cars with a
cylinder capacity of 2.5 or more, the import tax rate must be reduced from 90% to 52%
after 12 years after joining (2019).
ASEAN Trade in Goods Agreement: All types of cars with 10 seats or more
and trucks have been reduced import tax to 5% since 2006. Particularly for cars of 9
seats or less will have to to reduce to 0% in 2018 (expected import tax in 2015 to be
reduced to: 35% and in 2016: 20%, 2017: 10%).
Trans-Pacific Strategic Economic Partnership Agreement (TPP): It is expected
that by 2026, the import tax of passenger cars from countries participating in TPP will
be reduced to 0% (expected to be gradually reduced and started cutting back in 2016).

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On the other hand, through the survey of special consumption tax policy for
cars of countries in the region shows that: The special consumption tax rate for cars
with less than 9 seats with a cylinder capacity of 2,000 cm3 in Vietnam is 45% is the
average regional tax rate lower than Malaysia, Laos and Singapore and Cambodia.
Indonesia has a low special consumption tax rate of 20% but has a registration fee of
20% and a road fee of 2% on the selling price inclusive of VAT (if the car has a selling
price of more than VND 500 million, the road fee is the set is 10 million / year while
in Vietnam 1,560 million / year). - Regarding incentives to encourage the localization
of automobile production, for the period before 2007, before joining the WTO, the
special consumption tax policy for automobiles has shown a special preference for the
automotive industry. The development rate is 95% reduction of the special
consumption tax rate for domestically manufactured and assembled cars. From 2007
onwards, when Vietnam joins the WTO, the preferential treatment for cars
manufactured and assembled domestically is a violation of the commitment, therefore,
this incentive must be abolished.
From the above-mentioned contents, the current policy on excise tax adjustment
for cars is suitable to the current socio-economic conditions and in the coming years,
in accordance with the practices of the neighboring countries. Around and the country
has a similar socio-economic development situation with our country. Therefore, it is
not necessary to amend the SCT tariff table for cars with less than 24 seats. This is also
the guarantee of the special excise tax policy for cars, which is consistent with the
conclusion of the Prime Minister Nguyen Tan Dung on the strategy of developing the
automotive industry.

3. PROPOSAL FOR CURRENT SPECIAL SALE TAX IN VIETNAM

3.1. Taxable objectives


3.1.1. Gasoline of all kinds, naphtha, reformade component and other
components for mixing gasoline:
Special tax, with the role of regulating production, circulation and
consumption of some luxury goods and services that are not extremely necessary to

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show the strength management and control in a concentrated and strict manner for
these goods.
According to calculations, tax costs accounted for 43% of the price into retail
sale of gasoline products with 4 different taxes: gasoline products at 18%; 10% Special
tax; Environmental protection tax is also apply at 1,000 VND / liter; 10% value added
tax. The total amount of taxes and fees corresponding to each liter of gasoline and
continue to push up gasoline prices, including excise tax. RON 95 petrol prices are
sold Current odd (updated until October 1st, 2019) is at VND 21,191/ liter in the
regions.
In principle, gasoline retail prices are calculated on a harmonized trilateral
interests: state - business - consumers. However, in reality nobody is willing to suffer
losses, the state always collects taxes by setting fee. Therefore, whenever there is a
fluctuation in the price of gasoline, all disadvantages become real burden for
consumers and transportation businesses. From my points of views, gasoline
subjecting to special tax is very absurd, since the essence of excise tax is collected on
goods that are discouraged from using luxury goods, such as alcohol, cigarettes, or
harmful items that have bad effect on human health consumption, the social, and the
environment in general.
Meanwhile, the factors that adversely affect the environment need to regulate
drainage used, if we consider this espect, gasoline is already a commodity subject to
environmental protection tax. Moreover, gasoline is the essential fuel catering to the
important services like circulation, production, and mass use... Most importantly, all
price movements affect the price chain transportation, commodity prices. Therefore,
the excise tax on goods gasoline is unreasonable and improper in nature of this tax.
Thus, the Goverment should take into account on gasoline and its role in social life,
such as economic production to impose reasonable level taxes and fees. Additionally,
strengthening research and developing clean and friendly energy to encourage
production and consumption
3.1.2. Cars

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According to Clause 4, Article 3 of the Law on special tax Non-taxable
objectives include: Ambulances; prison vans; hearses; cars designed with both seats
and standing places for transporting 24 or more people; cars running in recreation,
entertainment and spoils areas which neither are registered for circulation nor move on
roads;
However, regulations on non-taxable cars must be added, such as: cars used for
frequency sweeping and armored vehicles, launch ladders, mobile televisions, vehicles
fitted with security equipment defense, vehicles running in the factory area. Due to the
tax collection for these vehicle is not suitable for the purpose of tax policy, so it is not
guaranteed fairness between cars of the same type

3.1.3. Air conditioning items

These days, for capacity air conditioners items 90,000 BTU or less, this is
common in domestic families, so it is recommended not to apply special tax on this
item.
3.1.4. Add some goods and services to the taxable objectives
In addition to 17 groups of goods and services subject to special tax, to suit the
current social and economic development, we need to ensure the proper
implementation in the purpose of the special consumption tax policy and regulate
consumption spending on luxury goods, restricting harmful products consumer health,
we proposes to supplement some groups, the following services are supposed to be
under special tax:
a/ Sending message service for voting and forecasting prizes:
In recent years, many businesses have signed contracts on value added with TV
stations, radio stations and carriers (Vinaphone, Mobiphone, Viettel) organize contests
and votes (Vietnamese models,Idol, The Voice, Athlete of the Year, anticipating the
end results of games, sports competitions, soccer results ...) to collect guests' money
customers participate in the form of messaging with texting fee from 5,000 VND -
15,000 VND / 1 message (for normal messages, customers only need to pay fee of
300-350 VND / 1 message). The network collects money from customers and then

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divides the revenue according to cooperation contracts for organizational units.
Currently, the operators only declare and pay VAT, not declaring and paying special
tax with these services due to the current regulations specify a betting business and a
prize-winning game that includes a texting service this rewarded news. However, from
the writer's personal viewpoint, inner nature use this bonus message as a bet (predict,
vote for or character) bid products and predict the number of participants, ...). The
current excise law does not specify these services enterprises are subject to this tax so
enterprises have not declared and paid service delivery tax. To ensure equality
between businesses. Like other betting businesses, the Ministry of Finance proposed to
supplement this service group are subject to special tax and apply the same special tax
rate for betting business is 30%.
b/ Online and non-online video games
The introduction of online and non-online video games is subject to special tax
rates are based on both economic and social grounds. From ecomomic aspect, this is a
highly profitable business service, about 50-60% of sales collection. According to
Vietnam Software Business Association (Vinasa), in 2010, Vietnam has about 80
companies trading online video games with the average customer is 20,000 people per
company. Average revenue 01visitors / year is US $ 50. Total online video game sales
approximately 80 million US dollars, up 30 million in absolute terms and 60% in
relative terms compared to 2007. According to a research report of Niko Partners, the
2015 Vietnam's video game business may double sales compared to 2011, topping 6
Southeast Asian countries (including Thailand, Philippines, Indonesia, Malaysia,
Singapore and Vietnam, have total sales in 2011 about 474 million US dollars). The
total number of players in the area is about 100 million people.
From social perspective, online video games have mainly users Pupils, students,
is the service that can negatively affect the young photo affect learning, living, and
other complex social issues. With picture Informal is an entertaining game, in terms of
the State's management of regulations in terms of content management for games,
there is a need for different policies to contribute consumer orientation, avoiding too

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much play to affect learning practice, activities, and other social issues. Therefore, it is
proposed to add this type of service to taxable subjects special tax, as with other types
of prize-winning video game services with a tax rate 30% interest.
3.2. Interaction with other taxes
Each type of tax have different effect on the moderating national income as well
as developing the economy of the Government. Therefore, each tax will work
separately from the others. However, there are interactions between them on how they
are concluded into the goods and services price.
- Interaction between Special Sales Tax and Value Added Tax (VAT):
Goods and services that are subject to special sales tax are also subject to Value
Added Tax with the same amount of goods and services listed for special sales tax. In
the past, when the VAT first implemented, manufacturers, providers and importers of
goods and services in the special sales tax categories were not subject to VAT (confer
to Article 4 in Decree No. 32/2007/TT-BTC). This regulation caused difficulties in
calculating and managing VAT duty. This regulation has been amended and added that
goods and services subject to special sales tax will now be to VAT as well, which is
10%.
Goods and services that had completed special sales tax duty when circulating
in the market will not be subject to special sales tax once again and the providers will
not have to fulfil the duty.
- Interaction between Special Sales Tax and Import Duty
Importers importing goods subject to special sales tax will have to bear VAT
and Import duty.

4. SPECIAL SALES TAX IN PRACTICE

4.1. Calculation of Special Sales Tax


The amount of special sales tax applied on taxable goods and services is based
on the calculation extracted from the document of Law No.27/2008/QH12 on Excise
Tax as follow:

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“Excise tax bases include the taxed price of a taxable goods or service and the
tax rate. The payable excise tax amount is the excise taxed price multiplied by the
excise tax rate.”
Special sale tax = Excise taxed price x Excise tax rate
The excise taxed price of a goods or service is the goods selling price or the
service charge, exclusive of excise tax and value-added tax, which is determined
according to the Law on Excise tax No. 27/2008/QH12:
“The excise taxed price of a goods or service is the goods selling price or the
service charge, exclusive of excise tax and value-added tax. Specifically:
1. For domestically produced goods, it is the selling price set by the producer;
2. For imported goods, it is the import-duty calculation price plus the import
duty. For imported goods eligible for import duty exemption or reduction, it is
exclusive of the exempted or reduced import duty amount;
3. For processed goods, it is the taxed price of the goods sold by processing-
ordering establishment or the selling price of the product of the same or similar kind at
the same time with the time of goods sale;
4. For goods sold on installment or deferred payment, it is the one-off selling
price of such goods, exclusive of the installment or deferred payment interest;
5. For services, it is the service charge set by the service provider. The service
provision in a number of cases is specified as follows:
a/ For golf business, it is the selling price of the membership card or golf-
playing ticket, inclusive of the golf playing charge and deposit (if any);
b/ For casino, prize-winning video game and betting business, it is the turnover
from such business minus the prize already paid to customers;
c/ For dance hall, massage parlor and karaoke bar business, it is the turnover
from such business.
6. For goods and services used for barter, internal consumption or donation, it is
the excise taxed price of the goods or service of the same or similar kind at the time of
barter, internal consumption or donation.

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Excise taxed prices of goods and services specified in this Article are inclusive
of additional charges and revenues (if any) enjoyed by business establishments.
Taxed prices are calculated in Vietnam dong. In case taxpayers have foreign-
currency turnover, foreign-currency amounts must be converted into Vietnam (long at
the average exchange rate on the inter-bank foreign currency market, announced by the
State Bank of Vietnam at the time of turnover generation, for determination of taxed
prices.”
Application exercises:

1. A liquor manufacturer B has used 1,000 bottles of 45 degree liquor for


domestically using and gifting. The price of 1 bottle of 45 degree liquor at the
manufacturing location is 15,000 VND/ bottle.

Calculate the the special sales tax of 1,000 bottles of 45 degree liquor used .
Provided that the excise tax rate for liquor over 40 degree is 75%.

Answer:
Determining Excise tax price: Since these liquor bottles are domestically
produced and used, the amount of excise tax price is the selling price set by the
manufacturer, which, in this case, is 15,000 VND.
So the amount of special sales tax paid is:
Special sales tax = 1,000 x 15,000 x 65% = 9,750,000 VND
2. 7-seat cars are one of the goods that are affected by special sales tax. The
import CIF price for a 7-seat car is 15,000 USD/ unit. Import-duty calculation price is
20,000 USD/unit (as regulated by the Government) and import tax rate for 7-seat car is
35%. Calculate the amount of special sales tax on a 7-seat car.
When the importer sells the car on the market, do they need to pay the VAT? If
yes, calculate the amount of VAT. Provided that the exchange rate is 1 USD = 23,100
VND.
Answer:
Import tax price: 20,000 x 23,100 = 462,000,000 VND

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Import duty: 462,000,000 x 30% = 138,600,000 VND
Now we have to determine the Excise tax price. As mentioned, for imported
goods, excise tax price is the import-duty calculation price plus the import duty.
Excise tax price = 462,000,000 + 138,600,000 = 600,600,000 VND
Special sales tax = 600,600,000 x 35% = 210,210,000 VND
4.2. Factors affecting the enforcement of Special Sales Tax in Vietnam
Law enforcement is generally known as the activities to enforce and obey laws.
In a narrow meaning, law enforcement is the responsibility of the government’s
agencies. Nonetheless, this definition is quite rigid and not adequate because law is a
common norm that every citizen must observe it. That’s why in the government
perspectives, all of the residents are required to obey and enforce laws.
4.2.1. Objective factors
- Economic Factors
The current Special Sales Tax law was enacted by the National Assembly in
November 2008 and took effect from April 1, 2009. Thus, in general, the legal
framework for Special Sales Tax appears later than other countries in the region and
around the world. Generally, Vietnam's economy develops later than many countries.
During a long period of time implementing the Special Sales Tax, the country's
economic situation has had many changes, making the implementation of the Special
Sales Tax law also changes. When economic factors change, it will affect the
implementation of Special Sales Tax.
- Cultural - Educational Factors
Any country in the world has its own laws to ensure the stability of the society.
Nevertheless, the culture to enforce the laws in each country is not the same. The law
in general and the Special Sales Tax law in particular always have a system legislation
to ensure the enforcement, but if the functioning agencies do not have culture of
respecting the law, the law enforcement is definitely not effective. Besides, if these
powerful subjects have a sense of law enforcement but economic entities who are

24
obliged to pay tax do not a sense of respect for tax enforcement, they may try to
conduct the tax evasion to get a higher profit.
Culture originates from education and education here has a broad meaning
including educating the awareness of family members, schools and the whole society.
Therefore, cultural - educational factors have a great influence on the enforcement of
law in general and the enforcement of Special Sales Tax law in particular.
- Global Trend
To catch up with the globalization trend, Vietnam has joined many international
playgrounds including the World Trade Organization (WTO). On 7/11/2006, Vietnam
was admitted as the 150th member of the World Trade Organization (WTO).
Therefore, to suit the new situation and ensure the compliance with commitments
when joining the WTO, Vietnam has made adjustments to the legal system, including
the Law on Special Sales Tax to fit the global standards.
4.2.2. Government Direction
Under the above socio-economic impacts, the governments are in charge of
giving direction for the enforcement of the Special Sales Tax law. Objectives of the
governments can be considered as a guideline for Special Sales Tax implementation
activities. If there are appropriate guidelines and directions, it will contribute
positively to the implementation of the Special Sales Tax law law in practice. In
contrast, inappropriate government’s directions can also cause difficulties for the
Special Sales Tax enforcement, which can lead to a great opposition in the society,
inadequate improper implementation.
4.3. Results of the enforcement of Special Sales Tax in Vietnam
The society is increasingly developing with a changing economy, the Special
Sales Tax has an increasingly important role, contributing a considerable part to the
national budget. Summary of more than 20 years of implementation and amendment of
the Law on Special Sales Tax show that basically, Special Sales Tax has achieved the
set goals of guiding production, social consumption, and regulating income of
consumers in a reasonable manner, and enhance the management of production and

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business of some goods and services. High tax rates applied to many items such as
tobacco, wine, beer, tourist cars, dance club business, … do not only enlarge revenue
for the government budget, but also play a role in consumer orientation. The policy on
Special Sales Tax exemption and reduction is announced in advance according to the
roadmap of gradually reducing protection for domestic beer production, automobile
assembly and assembly enterprises, ... to create favorable conditions for rearranging
production and business activities. Domestic and import duties have contributed to the
formation of a new industry.
Specifically, the implementation of the special consumption tax law actually
achieved many achievements as follows:
4.3.1. Directing the social expenditure and more equally redistributing the
income of the society
In a market economy, without governments’ intervention, in order for the
market to adjust itself, the distribution of wealth and income will be highly
concentrated, which creates two opposing poles: a minority of people will get rich
quickly, and the life of the majority of the population is at low income.
In fact, the development of a country is the result of the efforts of the whole
community, it would not be fair without sharing the achievements of the economic
development for everyone. Therefore, there is a need for state intervention in the
income distribution process which can be implemented effectively by using tax tools.
Taxes such as value-added tax, special sales tax, income tax ... aims at imposing
high taxes on high-class goods and services regularly purchased by high-income
people in order to equally re-distribute the income among the society. Special Sales
Tax with narrow taxable subjects, but with high tax rates on special and luxurious
goods and services is capable of aiding the State in regulating consumers' income.
For example, cars with less than 9 seats high tax rates based on cylinder
capacity of 45-60%; yachts and airplanes with 30% tax; 40% disco service ...; group of
goods harmful to health (medicine cigarettes, cigars) at a tax rate of 65%; wine and
beer of all kinds with tax rates of 25-50%. Groups of goods and services (massage

26
services, karaoke, casino, electronic games with prizes) which are usually consumed
by high-income parts are also taxed at a high rate, 30% ... For cars, in addition to
regulating the income of high-income people, Special Sales Tax is also effective in
limiting the usage of private car when our country's transportation system and
infrastructure is still poorly developed.
Thus, we can see that one of the important results that Special Sales Tax has
achieved is to contribute positively and effectively in forming a healthy consumption
trend, encouraging production and consumption of goods in conformity with the
country's economic conditions and circumstances in each period.
4.3.2. Stabilizing and increasing the government budget
Along with other taxes, Special Sales Tax contributes to stabilizing and
increasing revenue sources for the government’s budget. The proportion of the
government budget coming from Special Sales Tax in the total budget revenue from
taxes, fees and charges has been stable over the years (the total domestic Special Sales
Tax accounted for about 11-12% of the total domestic budget revenue). The structure
of Special Sales Tax collection from domestically manufactured goods keeps a stable
proportion of the total revenue from taxes and fees of the government budget. The
table below gives more detailed information:

Index 2010 2011 2012

Total revenues from taxes and fees 524.998 655.476 678.012

Special Sales Tax revenues from domestically 37.311 42.868 43.364


manufactured goods

Proportion (%) 7,1 6,53 6,39

Table: Structure of Special Sales revenues from domestically produced goods

In the total tax revenue collected from Special Sales Tax, the revenue from car,
tobacco and wine, beer accounts for the largest proportion. Special Sales Tax is

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expected to continue to be a stable source of revenue for the government budget in the
coming years.
- Automobile industry
According to statistics in 2013, Vietnam currently has 18 FDI enterprises and
38 domestic enterprises engaged in manufacturing and assembling with the
productivity about 460,000 vehicles / year; including 200,000 cars, 215,000 trucks and
other vehicles. These firms account for an average annual contribution of more than $
1 billion to the State budget (only accounts for tax). Special Sales Tax accounts for a
large proportion of the total tax revenue of the automotive industry.
- Wine and beer industry
According to the statistics of Ministry of Industry and Trade, Vietnam market
currently has more than 30 domestic and international beer brands. According to the
General Statistics Office, published by the Vietnam Beer - Alcohol - Beverage
Association (VBA), in 2013 alone, beer production reached 2,902 million liters, an
increase of 2.47% compared to 2013 and beer consumption reached 3,042 million
liters, up 11.85%. Wine produced by industry reached 66.8 million liters, up 4.4% and
consumed 67.9 million liters, up 6.9%.
VBA's member enterprises contributed to the government budget in 2013 an
amount of up to VND 20,817 billion. Special Sales Tax also accounts for a large
proportion of the total tax revenue of the wine and beer industry because the tax for
this kind of beverage is really high.
- Tobacco industry
Vietnam's tobacco industry annually contributes nearly 20,000 billion VND to
the state budget and creating jobs for nearly 6 million workers in branch. Tobacco
plants occupy tens of thousands of hectares of arable land. The Special Sales tax rate
for tobacco products is 65% so the revenue from Special Sales Tax accounts for a
major proportion.
4.3.3. Giving incentives to the production of targeted products

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When Vietnam tried to integrate with the global economy by becoming an
official member of the World Trade Organization, the implementation of increasing
tax rates for a number of items such as domestically assembled cars, wine, beer. .. has
been amended in the Special Sales Tax Law 2008. However, the increase in tax rates
will be implemented gradually.
While Vietnam has not yet to implement international commitments, the
maintenance of a number of preferential tax rates for some items such as draft beer,
alcohol less than 40 degrees, and cigarettes using raw materials domestically,
domestically assembled cars has created favorable conditions for businesses to invest,
develop business, and improve their competitiveness before entering international
economic integration.
For automotive products, the Law on Special Consumption Tax 2008 has
adopted many classification criteria to arrange and restructure tax rates among car
groups, taking into account the occupied area affecting traffic and power sources,
usage and impact level on the environment. Vehicles with 5 seats or less, mostly with
cylinder capacity of less than 2000cc, have tax rates reduced from 50% to 45%,
creating favorable conditions for promoting the production and business of this type of
vehicle. In addition, the application of lower tax rates for vehicles using 60 electricity,
solar energy, bio-energy, together with propaganda to protect the living environment
have created a premise for encouraging. businesses that produce these vehicles
4.4. Limits of the enforcement of Special Sales Tax in Vietnam
During the implementation period, the tax administration in general and the
management and implementation of the Special Sales Tax in particular have had
positive changes, but in practice there are still some limitations on certain aspects such
as: the mechanism of inspection and supervision of Special Sales Tax are still loose,
leading to the phenomenon of fraud and tax evasion; organizational management
mechanism; tax officials; facilities and equipment; tax administration environment and
tax administration technology. As follows:
4.4.1. Ineffective tax supervising agencies leads to tax evasions

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A Real Case:
When expanding the investigation of the case of "smuggling, counterfeiting
documents of organizers, tax evasion, abusing positions and powers while on duty"
occurred in Hanoi relating a joint-stock company namely Hanoi Liquor (Halico) and
61 Hoang Lan Trading and Service Companies. Ltd, the Ministry of Public Security
has prosecuted and temporarily sentenced Mr. Ho Van Hải to detention on the
behavior of "abusing positions and powers while on duty".
According to the initial investigation documents, Mr. Hai took advantage of his
position when directing his subordinates to legalize the documents to enable Hoang
Lan Company to conduct a tax evasion by buying wine under the name of exporting to
Laos but in fact these products are domestically distributed for consumption.
From 2008 to 2012, Halico signed 4 contracts to trade alcohol exported to Laos
for Hoang Lan Company. Mr. Hai is suspected of knowing that Hoang Lan Company
distributed wine domestically instead of selling it to Laos, but he still instructs Nguyen
Thi Quynh Trang to legalize the records of shipments to Laos.
In April 2010, some of Halico's agents reported there is the case of exported
alcohol being sold domestically, so Mr. Hai stopped executing the contract with Hoang
Lan Company for a short period of time. In October 2010, Mr. Hai continued to allow
Hoang Lan Company to buy wine under the name of exporting. By December 2012,
when Halico's agents continued to reflect and complain about the same issue, Halico
completely stopped selling alcohol to Hoang Lan Company.
While still buying Halico's wine, Hoang Lan Company used a container truck
without packing goods to export 2,000 barrels of vodka to Laos via Cau Treo border
gate (Ha Tinh) and was discovered by Cau Treo border gate Customs on September
12, 2012.
The verification process revealed that from 2009-2012, Hoang Lan Company
opened 26 alcohol export declarations at the Northern Hanoi Customs Branch to
export wine to Laos via Cau Treo border gate (Ha Tinh) in a large amount and use
these forms to hand over to Halico Company for tax finalization. Through verification

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of 26 declarations, the authorities identified 7 fake declarations. The tax authorities
also determined that these individuals have forged goods invoices and export
declarations for final settlement in order to evade Special Sales Tax. The amount of
tax evasion is determined at nearly VND 10 billion, of which VAT evasion and
corporate income tax are more than VND 4 billion, and special consumption tax
evasion is more than VND 5.9 billion.
4.4.2. Ineffective tax administrative systems
Information and data in the tax administration program are not guaranteed to be
completely accurate, fully and promptly reflect the tax payment obligations of Special
Sales Tax taxable subjects. The storage of the information about the entire tax industry
is being implemented, which has not been fully utilized.
4.4.3. Ineffective tax inspecting and punishing mechanism
The inspection and handling tax violations committed by tax agencies have
been underestimated compared to their important role. It is common knowledge that
generally, the educational level of Vietnam citizens is still low on average. Their
awareness of legal responsibility is not high; tax fraud is quite common but has not
been detected and timely collected for the government budget. These factors lead to
both revenue loss for the government budget, the social justice and also tax law
discipline.

5. CONCLUSION:

The amount of tax revenue the federal government brings in through excise
taxes isn't a huge part of its overall budget, but it still plays an important role. Through
SST, The state collects a significant part of the income of the consumers in the state
budget. It is a tool very important for the state performing the function of directing the
production and regulation of social consumption. It helps the state to regulate between
the income of consumers and the state budget fairly: who consume more goods and
services subjected to SST must pay more than consumers with little or no tax payable.
Regulating the production, sales, circulation and consumption of some goods and
services nature of luxury, not necessity for social needs. The issuance of Special Sales

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Tax represents the centralized and strict management and control of the state to these
goods or services.
The big question facing government agencies is how much raising excise tax
rates will actually boost revenue. Any time the excise tax rate rises, the resulting
higher price results in less demand for the product being taxed. Up to a certain point,
the greater tax per sale outweighs the lower number of sales, but beyond that critical
point, further excise tax increases can be counterproductive from a revenue-raising
standpoint. Excise tax isn't something most taxpayers think about very often, but it is
becoming a more important source of government revenue every year. In considering
how much in tax you have to pay, make sure to include the impact of the excise taxes
that often get lost in the price of what you buy.
Actually, Governments can carry out impact assessments before levying excise
taxes, with a particular focus on women and poor people, to ensure these groups are
not disproportionately affected. Charging higher excise duties on luxury products, as
these tend to be progressive, and lower ones on products that poor people buy, as these
tend to be regressive. Ensuring that there are exemptions for domestic fuel (such as
kerosene); and other fuels if impact assessments suggest this is appropriate. They also
should consider excise taxes’ potential for achieving wider policy objectives, such as
improving public health or reducing carbon emissions and harmonisation of excise
taxes between groups of neighbouring countries, to reduce incentives for smuggling.

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REFERENCE
1. Nghị định 32/2007/TT-BTC HƯỚNG DẪN THI HÀNH NGHỊ ĐỊNH SỐ
158/2003/NĐ-CP NGÀY 10/12/2003, NGHỊ ĐỊNH SỐ 148/2004/NĐ-CP
NGÀY 23/7/2004 VÀ NGHỊ ĐỊNH SỐ 156/2005/NĐ-CP NGÀY 15/12/2005
CỦA CHÍNH PHỦ QUY ĐỊNH CHI TIẾT THI HÀNH LUẬT THUẾ GIÁ TRỊ
GIA TĂNG VÀ LUẬT SỬA ĐỔI, BỔ SUNG MỘT SỐ ĐIỀU CỦA LUẬT
THUẾ GIÁ TRỊ GIA TĂNG
2. Law No. 27/2008/QH12 on Excise Tax
3. Law No. 70/2014/QH13 on AMENDMENTS TO SOME ARTICLES OF THE
LAW ON SPECIAL EXCISE DUTY
4. Consolidated document No. 02/VBHN-VPQH on Excise Tax
5. Hoàng Thị Tuyết (2014) PHÁP LUẬT VỀ THUẾ TIÊU THỤ ĐẶC BIỆT Ở
VIỆT NAM – THỰC TRẠNG VÀ GIẢI PHÁP

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