City proposal to slap luxury tax on mobile phones raises hackles
HCMC’s proposal to impose a special consumption tax on mobile phones has drawn protests from experts, who said they are not a luxury product. Dr. Nguyen Thanh Binh of the Ministry of Planning and Investment’s Institute of Policy and Development said the proposal should be carefully considered since no other country levies a luxury tax on mobile phones.
The nature of such a tax is to hit luxury goods or discourage consumption of goods that use up foreign currency for imports or harm the environment or human health, he explained.
“We have to ask ourselves whether mobile phones are essential or luxury, and what effect it has on the environment and health.”
Mobiles are now ordinary goods used by everyone, he said.
The city people’s committee has recently sent to the Ministry of Finance suggestions for a draft proposal on “expanding the tax base and preventing erosion of state revenues.”
It said mobile phones are not luxury goods but not “very essential” either, and so it wants to regulate consumption to ensure it is “reasonable.”
It also called on lawmakers to add items such as cameras, perfumes, cosmetics, gaming services, and beauty services to the list of items subject to special consumption tax to target the population segment with above-average income.
Binh queried this rationale saying the city can simply use income tax for this.
Nguyen Duc Nghia, chairman of Ho Chi Minh City Tax Agents Club, an association of tax consultants, said the mobile phone has become a commonplace product used by everyone.
Therefore, a luxury tax would not have the effect of taxing only wealthy individuals and would instead affect everyone, he said.
Truong Thanh Duc, chairman of Basico law firm, said special consumption tax is normally levied on luxury goods and those that are harmful or which the government wants to discourage people from using.
In fact, in a quickly developing economy, this tax should be eliminated on many goods since what were once luxury goods gradually become essential items as people become more affluent, he pointed out.
“Thirty years ago mobile phones were a luxury item but not taxed. Now it has become a popular item, with the number of telephone subscribers equaling the population. Levying a luxury tax on such a good is far from reasonable.”
Up to 73 percent of the population uses mobile phones, on which 42 percent use smartphones and 50 million people use mobile social media, according to a report by Vietnamese digital advertising firm Adsota earlier this year.