Proposal not to increase special consumption tax on alcohol and beer to 100%

The Ministry of Finance is seeking opinions to increase the special consumption tax on alcoholic beverages (beer, wine) and soft drinks. Accordingly, this agency proposes to increase this tax according to the roadmap for alcohol above 20 degrees to 100% by 2030. Similarly, alcohol below 20 degrees is subject to a 50% tax, then increased to a maximum of 70%. Beer of all kinds will also increase gradually from 80% to 100%.

In a petition sent to the Ministry of Finance on July 1, the Vietnam Beer, Alcohol and Beverage Association (VBA) said that increasing the special consumption tax on alcohol and beer to an absolute level would cause businesses in the industry to face "unprecedented difficulties in history." Therefore, they proposed to postpone the deadline and reduce the tax increase.

Specifically, VBA proposed to postpone the effective date of the Law on Special Consumption Tax (amended) to 2027, instead of 2026 as planned by the Ministry of Finance.

Regarding tax rates, for alcohol above 20 degrees, the Association proposes to increase from 75% in 2027, with a roadmap to 80% in 2031. For alcohol below 20 degrees, the tax rate will be from 40% to a maximum of 50%. Beer of all kinds will be from 70% to a maximum of 80%.

Currently, the special consumption tax rate for beer is 65%, and for wine is 35-65% depending on the alcohol content below or above 20 degrees. The Ministry of Finance wants to increase the tax to adjust the selling price by 10% according to the recommendation of the World Health Organization (WHO).

However, VBA believes that the basis for the proposed tax adjustment and impact assessment of the drafting agency only focuses on the goal of increasing selling prices, without considering the impact on reducing consumption, the budget or businesses.

They said the impact assessment report focused on the pre-pandemic period - 2019, when the beverage industry was not facing the current difficulties. Therefore, this does not accurately reflect the current business situation.

According to VBA, the beer industry accounts for 98.6% of the alcoholic beverage industry market share. Vietnam produces and consumes about 4 billion liters of beer a year. Sabeco, Heineken Vietnam, Habeco, and Carlsberg are the businesses that hold nearly 95% of the market share and total industry output. However, these businesses are facing many difficulties due to reduced sales volume.

For example, Heineken Vietnam saw a double-digit market decline in 2023, the first time in decades. Sabeco has 26 factories in 20 provinces and cities, but since 2021, the company has seen negative growth in output, revenue, and profit. Subcontracting factories in the system are also facing difficulties because input costs have increased by 20-40% while selling prices have not increased.

Similarly, in the alcohol industry, Halico recorded losses for 27 consecutive quarters. The company's accumulated losses amounted to nearly VND458 billion.

In addition, according to VBA, high taxes will increase smuggling, currently about 200-300 million liters of fake branded beer each year. They suggested that in addition to increasing taxes, authorities need to fight smuggling to protect legitimate businesses, consumer health and prevent budget losses.

In addition to wine and beer, the Ministry of Finance also plans to impose a 10% special consumption tax on soft drinks. In this proposal, VBA also suggested that the drafting agency not impose this tax on soft drinks with a sugar content of more than 5g per 100ml. According to them, imposing a tax on this product is not feasible to achieve the goal of reducing the rate of overweight and obesity, when the disease is caused by many factors, not by the use of soft drinks.