Impacts of excise taxation on non-alcoholic beverage consumption in Vietnam

Abstract

Vietnam is faced with the issue of increasing overweight and obesity, particularly among children and adolescents in urban areas. As a result, the government of Vietnam recently introduced a proposal to impose a special consumption tax on sugar-sweetened beverages (SSB) in Vietnam, as the drinks are causing negative health consequences for Vietnamese people. This research is aimed at evaluating the impacts of a 10% special consumption tax on SSB in Vietnam using the Almost Ideal Demand System (AIDS) model. We found that a 10% SSB tax will reduce SSB consumption by 11.4%. Consumers will switch to substitutes, leading to an increase in the consumption of milk by 2.3%, beer by 2.5%, dried tea by 2.2%, and wine by 1.7%. However, in the short run, the tax could lead to a decrease in consumer welfare due to higher SSB prices. In addition to people from better-off households, people from the ethnic majority group, most of which live in urban areas with a large number of children, have a relatively high welfare reduction.