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Ho Chi Minh City mulls ‘special consumption tax’ for mobile phones

Thursday, May 09, 2019, 16:02 GMT+7
Ho Chi Minh City mulls ‘special consumption tax’ for mobile phones
Customers experience newly-launched smartphones at a store in Ho Chi Minh City. Photo: Quang Dinh / Tuoi Tre

The Ho Chi Minh City People’s Committee proposed that mobile phones and cosmetics should be included among goods subject to a special consumption tax, a move that many say inadequately categorizes certain products.

The city’s administration has submitted its feedback on the finance ministry’s plan to expand the list of commodities subject to an excise tax in order to prevent ‘erosion’ of the state budget.

Vietnam currently applies a special consumption tax exemption to 25 groups of goods and services, which the Ho Chi Minh City administrators say is far more than international standard of four to eight groups.

The administration thus suggested that the ministry consider adding more products to the list, including mobile phones, security cameras, perfumes, cosmetics, game services, and plastic surgery services.

Particularly, the Ho Chi Minh City People’s Committee thinks that perfumes and plastic surgery services are premium services, and applying an excise tax to the purchase of these products will help to “properly regulate tax revenue from high and upper-middle income groups.”

For the remaining aforementioned goods and services, a special consumption tax will help “moderate their use and supply.”

As for smartphones, obviously not a product only used by the rich, the city administration says excising them only affects high and upper-middle income groups, who usually purchase the newest and expensive products.

It appears that in the Ho Chi Minh City administration’s view, premium products should be subject to a special consumption tax, and thus will only affect those with average- and higher incomes.

As a deterrent, excise is typically directed towards three broad categories of harm, such as toxic substances, such as tobacco, or practices that lead to environmental damage, such as fossil fuel.

Some experts thus question the adequacy of imposing excise on such common products as mobile phones.

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