VietNamNet Bridge – The Government previously proposed imposing special consumption tax on online games to prevent negative impacts on society but removed the proposal in a draft of the amended law on the tax presented to the National Assembly (NA).

Children play online games at an Internet café in Hanoi

In a report on reviewing the law on special consumption tax earlier, the NA Finance and Budget Committee said there was a proposal for the tax to be subject to online games due to their negative impacts on society.

However, online game firms argued that the online games licensed in Vietnam have contents approved by management agencies and that it is the smuggled products that contain bad contents.

The firms said the planned imposition of special consumption tax will restrict the competitiveness of local online game producers while the locally-made games have not been developed enough to replace imports. Therefore, the Finance and Budget Committee proposed delaying the tax imposition on online games to facilitate domestic companies and Vietnam’s information technology and to support State budget collections.

On September 8, the Government submitted the draft law on special consumption which did not mention online games to the NA Standing Committee. However, at the meeting on September 25, the NA Standing Committee required the drafting committee to consider adding online games to the taxable list.

Right after that, VNG Corporation, the largest online game company in Vietnam, lodged a petition to the Government Office and relevant agencies, saying that if online games are slapped with special consumption tax, up to VND1 trillion may be lost and the tax will affect the country’s budget collections in the long term.

Free special consumption tax will enable domestic companies to compete on par with foreign rivals and bring in revenues of around VND8 trillion per year.

Nevertheless, with a possible special consumption tax rate of 10%, their revenues will drop by 30-50% and may incur losses. If so, with the tax levied on online games, an additional VND800 billion may be collected each year but it is likely that VND626-1,043 billion of revenues will be lost.

According to VNG, most online game producers in Vietnam are distributors. In addition to 73 games licensed by the Ministry of Information and Communications, there are hundreds of games supplied via the Internet without licenses.

VNG suggested special consumption tax should not be imposed on online games as it is like a form of protecting foreign game companies and goes against Decree 71/2007/ND-CP guiding the implementation of the information technology law and Vietnam’s plan for digital content development.    

SGT/VNN