The consumption impacts of imposing excise tax on sugar sweetened beverages in vietnam

VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY LUONG NGOC MY LINH THE CONSUMPTION IMPACTS OF IMPOSING EXCISE TAX ON SUGARSWEETENED BEVERAGES IN VIETNAM MASTER'S THESIS …………………………… Master of Public Policy Hanoi, 2019 VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY LUONG NGOC MY LINH THE CONSUMPTION IMPACTS OF IMPOSING EXCISE TAX ON SUGARSWEETENED BEVERAGES IN VIETNAM MAJOR: MASTER OF PUBLIC POLICY CODE: PILOT RESEARCH SUPERVISOR: Associate Prof Kaida Naoko Dr Vu Hoang Linh ACKNOWLEDGEMENT Two years in Vietnam Japan University has come and gone It is my pleasure to become a part of second intake students of this university, where I had a chance to meet many interesting and unique friends as well as many enthusiastic and excellent professors Thanks to Vietnam Japan University, I was able to experience a totally different academic environment from other school, which is worth to spend my time and challenge myself First, I would like to express my sincere gratitude to my supervisors, Assoc.Prof Kaida Naoko from University of Tsukuba and Dr Vu Hoang Linh from Vietnam Japan University for their enthusiasms, patience and support from the beginning to finishing of my master thesis With their numerous years of experiences and profound knowledge, both supervisors have always given me helpful advices whenever I crashed into a dead end My honest appreciation goes to JICA, VNU, VJU, University of Tsukuba for giving me great opportunity to study in VJU and experience three-month internship in Japan I also would like to say thanks to all staff in VJU, especially in Program of Master of Public Policy and to the staff in Office of Global Initiatives in University of Tsukuba for their timely assistance and making my study time memorable Besides this, I want to express my thankfulness to all second intake students, especially to become a part of my student life Hope that everyone will be successful and be happy in the future Finally, it will be missing unless mentioning on the encouragement and support of my parents, elder sister and the caring of my niece and nephew and lots of my friend despite of my ignorance when studying in VJU i TABLE OF CONTENTS ACKNOWLEDGEMENT LIST OF TABLES LIST OF FIGURES LIST OF ABBREVIATIONS CHAPTER 1: INTRODUCTION 1.1.Research background 1.2.Research Objective and Research Questio CHAPTER 2: LITERATURE REVIEW 2.1.An overview of sugar-sweetened beverag 2.2.Taxing sugar-sweetened beverages 2.3.Discussion over excise tax on SSBs 2.4.Consumption Impacts of Excise tax aroun 2.5.Previous Studies about Sugar Sweetened 2.6.Econometric model to estimate demand f 2.6.1 T 2.6.2 T 2.6.3 W 2.6.4.The Almost Ideal Demand System (AIDS) CHAPTER 3: METHOD AND METHODOLOGY 3.1.Paradigm 3.2.Data Collection 3.2.1 A 3.2.2 D 3.3.Data Analysis 3.3.1.Overview of SSB consumption and SSB consumer 3.3.2.Expenditure, compensated and uncompensated elasticity 3.3.3.The differences in elasticity between different household patterns i 3.3.4 CHAPTER 4: RESULTS 4.1 Sugar-sweetened beverages consumption 4.2 AIDS results 4.3 The impacts of household characteristics 4.3.1 4.3.2 4.3.3 4.3.4 4.3.5 4.3.6 4.4 Welfare effects 4.5 Discussion CHAPTER 5: CONCLUSION 5.1 Policy implication 5.1.1 lifestyle 5.1.2 specific groups 5.2 Further Study 5.3 Limitations REFERENCES ANNEX 1: LIST OF COUNTRIES THAT ARE APPLYING SPECIFIC TAX ON SUGAR-SWEETENED BEVERAGE ANNEX 2: DATA PROCESSING SUMMARIZE iii LIST OF TABLES Table 2.1 Controversy over SSB excise tax Table 3.1: Information about Vietnam Household Living Standard Survey 2016 .25 Table 3.2 The sample of VHLSS 2016 27 Table 4.1 Elasticity result 36 Table 4.2 Compensating Variation by categories if applying 10% excise tax on SSB 46 iv LIST OF FIGURES Figure 1.1: Government budget and public debt in Vietnam 2011 – 2016 .3 Figure 2.1 Health impacts of obesity Figure 2.2 Pathway for the effect of fiscal policy intervention .6 Figure 2.3 The 5-tier health impact pyramid Figure 2.4: Map of cities and countries that are implementing taxing sugary drinks 11 Figure 4.1 The price distribution of SSB consumed by households in VHLSS 2016 34 Figure 4.2 SSB consumption in Vietnam 2008 – 2016 through VHLSS 35 Figure 4.3 SSB’s expenditure, compensated and uncompensated elasticity be separated by urban and rural area 39 Figure 4.4 SSB’s expenditure, uncompensated and compensated elasticity separated by major or minor ethnicity 40 Figure 4.5 The SSB’s expenditure, uncompensated and compensated elasticity be separated by the number of children in the household 41 Figure 4.6 The SSB’s expenditure, uncompensated and compensated elasticity be separated by the quintile of household 42 Figure 4.7 The SSB’s expenditure, uncompensated and compensated elasticity be separated by six regions in Vietnam 43 Figure 4.8 The SSB’s expenditure, uncompensated and compensated elasticity be separated by time of consuming 45 Figure 5.1 The number of hours that Vietnamese spend on doing exercise 53 v LIST OF ABBREVIATIONS BMI Body Mass Index CV Compensating variation EV Equivalent variation FAFH Food Away from Home GSO General Statistics Office HFCS High-fructose corn syrup IEH Income and expenditure household IH Income household MOF Ministry of Finance NCD Non-communication disease OLS Ordinary least squares O&O Overweight and obesity PHPT Public health product tax SSB Sugar-sweetened beverage AIDS The Almost Ideal Demand System VHLSS Vietnam Household Living Standard Survey vi CHAPTER 1: INTRODUCTION 1.1 Research background In comparison with 1975, the prevalence of overweight and obesity (O&O) worldwide in 2016 was said to be nearly tripled It is estimated that until 2016, 39% of adults were overweight, 13% of adults were suffering from obesity whereas more than 18% of children and adolescents between and 19 years old were obese (World Health Organization, 2018) In parallel with higher living conditions, nowadays, the number of deaths that related to O&O are now more than that caused by underweight Basically, the reason of this non-communication disease (NCD) is said to be the imbalance between intake and outlet calories as well as the insufficiency physical activities and so on (World Health Organization, 2018) Among products that contain high calorie intake, sugar-sweetened beverages (SSBs) was said to be one of the main reasons for O&O because its ingredients have a high amount of free sugar (World Health Organization, 2015) Based on this argument, around 40 countries and territories in the world has levied some specific tax policy on SSBs in order to increase the price and then reduce consumed amount of this kind of beverages (Global Food Research Program, University of North Carolina at Chapel Hill, 2018) From a poor country which had been severely destroyed by war, Vietnam has rapidly developed In 2018, the poverty rate according to multi-dimension approach was only 6.8% (General Statistics Office, 2018a) in comparison to 58% in 1993 and 75% in 1990 (World Bank, 2002) Parallel with successful economic achievements, Vietnam is also facing to some problems such as the increasing of the prevalence of O&O, particularly among children and adolescent in urban areas According to a survey conducted by Ministry of Health, the ratio of Vietnamese adults (18 to 69 years old) who are suffering from O&O (Body Mass Index – BMI ≥ 25) is 15.6%, in which14.9% of men and 16.9% of women) The situation seems worse than year before when these ratios in 2010 were 12.5% of men and 11.4% of women In addition to that, Vietnam Health Scheme has set the target for the percentage of adult who suffers from O&O under 12% until 2025 and under 10% until 2030 (Vietnam Prime Minister, 2019), which means that Vietnamese authority has a lot of things to to deal with this situation The rising trend was also observed among children and adolescents, with the prevalence of O&O among both genders increased from 2.6% in 2002 to 9.7% in 2016 (The Department of Preventive Medicine, 2017) In big cities such as Hanoi and Ho Chi Minh city, the ratio of children and adolescents who are suffering from O&O was 43% in 2009, increased from 12% in 1996 In 2014 – 2015, this ratio in the inner area of Ho Chi Minh city was 50% and a recent survey in the inner area of Hanoi showed that it was up to 40.7% (Hanoi Health Department, 2017) Although the average BMI of Vietnamese was still far less than O&O threshold, there are existing a concern that Vietnam may reach this ceiling soon As an effort in improving Vietnamese health condition, Ministry of Finance (MOF) had introduced a new excise tax applied on SSBs with the tax rate at 10% or 20% in 2016 According to Lax on Excise tax of Vietnam, excise tax is a tax that is applied on specific goods and services that (i) are not encouraged due to their bad effects on health; (ii) are normally consumed by high-income consumers in the society; (iii) are unnecessary services (Vietnamese Assembly, 2008) The rationale for levying excise tax was its high-containing sugar amount in each item, which is one of the reasons for O&O in Vietnam and around the world Added to that, imposing excise tax on SSBs is a new trend in the world and being strongly encouraged by international health organizations, such as WHO This was a part of Six-Tax-Law Amendment in order to reform tax system in Vietnam The tax law was introduced in the context of increasing government budget deficit and high public debt ratio in Vietnam, which was reflected by figure 1.1 Therefore, this reforming scheme was expected to increase government revenue and solve these problems http://www.mof.gov.vn/webcenter/portal/btc/r/lvtc/slnsnn/bcnsnnhn?_afrLoo p=27881985004847809&_adf.ctrlstate=tw53qidqi_4#!%40%40%3F_afrLoop%3D27881985004847809%26ce nterWidth%3D100%2525%26leftWidth%3D0%2525%26rightWidth%3D0 %2525%26showFooter%3Dfalse%26show The Ministry of Finance (2016a, May 11) Manual Government Budget 2016 Retrieved March 3, 2019, from The Ministry of Finance: http://www.mof.gov.vn/webcenter/portal/btc/r/lvtc/slnsnn/bcnsnnhn?_afrLoo p=27881985004847809&_adf.ctrlstate=tw53qidqi_4#!%40%40%3F_afrLoop%3D27881985004847809%26ce nterWidth%3D100%2525%26leftWidth%3D0%2525%26rightWidth%3D0 %2525%26showFooter%3Dfalse%26show The Ministry of Finance (2016b, June 30) Public Debt News No.4 Retrieved March 3, 2019, from The Ministry of Finance: http://www.mof.gov.vn/webcenter/portal/btc/r/lvtc/qln/qln_chitiet?dDocNam e=MOFUCM084850&dID=87294&_afrLoop=27881578204500064#!%40% 40%3FdID%3D87294%26_afrLoop%3D27881578204500064%26dDocNa me%3DMOFUCM084850%26_adf.ctrl-state%3Dnlg4g0u79_4 The Ministry of Finance (2017a, May 5) Manual government budget report Retrieved March 3, 2019, from The Ministry of Finance: http://www.mof.gov.vn/webcenter/portal/btc/r/lvtc/slnsnn/bcnsnnhn?_afrLoo p=27880466723355423#!%40%40%3F_afrLoop%3D27880466723355423 %26centerWidth%3D100%2525%26leftWidth%3D0%2525%26rightWidth %3D0%2525%26showFooter%3Dfalse%26showHeader%3Dfalse%26_adf.c trl-s The Ministry of Finance (2017b, August 23) Peblic Debt News No Retrieved from The MInistry of Finance: http://www.mof.gov.vn/webcenter/portal/btc/r/lvtc/qln/qln_chitiet?dDocNam e=MOFUCM109581&_afrLoop=27881004743387786#!%40%40%3F_afrL oop%3D27881004743387786%26dDocName%3DMOFUCM109581%26_a df.ctrl-state%3Dtw53qidqi_286 The Ministry of Finance (2017c) Proposal on Admenment and Adding some articles in Value-Added Tax, Excise Tax, Corporate Income Tax, Personal Income Tax and Natural Resources Tax Ha noi Theil, H (1965, January) The information Approach to Demand Analysis Econometrica, 33(1), 67-87 Vietnam Prime Minister (2019, September 2) Decision on Approving Vietnam Health Scheme No 1092/QĐ-TTG Ha Noi 61 Vietnamese Assembly (2008, November 14) Law on Excise tax No.27/2008/QH12 Ha Noi, Vietnam Vu, H L (2008) Essays on the Economics of Food Prodcution and Consumption in Vietnam University of Minnesota, Faculty of Graduate school Minnesota: University of Minnesota World Bank (2002, April 18) Vietnam poverty analysis Retrieved from World Bank Group: http://siteresources.worldbank.org/INTVIETNAM/Resources/VietnamPoverty-Analysis.pdf World Health Organization (2015) Guideline: Sugar Intake for Adults and Children Geneva: World Health Organization World Health Organization (2016) Fiscal Policies for Diet and Prevention of Noncommunicable Diseases: Technical Meeting Report, 5-6 May 2015, Geneva Switzeland Geneva: World Health Organization World Health Organization (2018, February 16) Obesity and overweight Retrieved from World Health Organization: https://www.who.int/news-room/factsheets/detail/obesity-and-overweight World Health Organization (2018) Technical Report on: Taxation for Sugar Sweetened Beverages in Sri Lanka, 2017 Sri Lanka: World Health Organization 62 ANNEX 1: LIST OF COUNTRIES THAT ARE APPLYING SPECIFIC TAX ON SUGAR-SWEETENED BEVERAGE No Country America Bermuda Dominica Barbados Mexico Peru Chile Belgium United Kingdom 10 Ireland 11 France 12 Spain 13 Portugal 14 ST Helena 15 Norway 16 Finland 17 Estonia 18 Latvia 19 Hungary 20 Morocco 21 Denmark 22 India United 23 Arab Emirates 24 Bahrain 25 Saudi Arabia 26 Mauritius South 27 Africa 28 Philippines 29 Thailand 30 Maldives 31 Sri Lanka 32 Brunei 33 Samoa 34 FR Polynesia 35 Palau 36 Fiji 37 Nauru Cook 38 Islands 39 Tonga 40 Kiribati 41 Vanuatu (Global Food Research Program, University of North Carolina at Chapel Hill, 2018) ANNEX 2: DATA PROCESSING SUMMARIZE Variable Food item i th Household characteristic The number of children under 16 years old in the nchild household The region that household is living: reg6_1 equaled to reg6_1 if household is living in Red River Delta, and reg6_1 equaled to if household is not living in Red River Delta The region that household is living: reg6_2 equaled to reg6_2 if household is living in Midlands and Northern Mountains, and reg6_2 equaled to if household is not living in Midlands and Northern Mountains The region that household is living: reg6_3 equaled to if household is living in North Centrals and Central reg6_3 Coast, and reg6_3 equaled to if household is not living in North Centrals and Central Coast The region that household is living: reg6_3 equaled to if household is living in Central Highlands, and reg6_3 reg6_4 equaled to if household is not living in Central Highlands The region that household is living: reg6_5 equaled to reg6_5 if household is living in South East, and reg6_5 equaled to if household is not living in South East ... objective of this paper is to estimate the consumption impacts of imposing SSBs’ excise tax in Vietnam It will focus on the main research question “How does excise tax on SSB impact on Vietnamese consumers?”.. .VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY LUONG NGOC MY LINH THE CONSUMPTION IMPACTS OF IMPOSING EXCISE TAX ON SUGARSWEETENED BEVERAGES IN VIETNAM MAJOR: MASTER OF PUBLIC... overview of sugar- sweetened beverag 2.2.Taxing sugar- sweetened beverages 2.3.Discussion over excise tax on SSBs 2.4 .Consumption Impacts of Excise tax aroun 2.5.Previous Studies about Sugar Sweetened