Special consumption tax on alcoholic beverages could double by 2030: MoF

A customer at a supermarket in HCM City. VNA/VNS Photo

HÀ NỘI Economists and industry experts have called for caution before raising Việt Nam’s special consumption tax on beers and alcoholic beverages, pleading with regulators to consider the long-term effect it may have on the budget. 

Dr Cấn Văn Lực, chief economist at BIDV and Director of BIDV Training and Research Institute, said the current global economic picture shows a declining trend in drinking, with a slow recovery following the COVID-19 pandemic. Meanwhile, economic recovery in Việt Nam from 2020 to 2024 has not been evenly realised. Changes in consumer behaviour and lifestyle have resulted in the consistent shrinking in the average profit margins of the industry. A 12 per cent decrease in 2021, a 6 per cent decrease in 2022 and an estimated 10-12 per cent decrease in 2023 compared to the previous year.

“The impact of the amended Special Consumption Tax Law could increase State budget revenue in the short term, but in the medium to long term, it may reduce consumer demand, decrease business revenue and profits, and thereby reduce VAT and corporate income tax revenue. Therefore, whether the overall tax revenue will increase or decrease remains unclear in the long term,” he said. 

Dr Ngô Trí Long, former Director of the Institute for Price and Market Research under the Ministry of Finance, said the principle of taxation should ensure a balance and harmony between the interests of the State and taxpayers.

Long raised concerns that if the total tax burden is too high it may negatively impact workers’ living standards, indirectly stall the economy and encourage tax evasion. Prolonged and excessive taxation may lead to a decline in production output and a general decline in the State budget. 

Opinions voiced

Hundreds of businesses, mostly from the beverage industry, attended a workshop organised by the Vietnam Chamber of Commerce and Industry and the Vietnam Beer – Alcohol – Beverage Association in Hà Nội last week. 

Nguyễn Đức Lê, deputy director of the Market Management Department under the Ministry of Industry and Trade said last year there were 102 violations reported across the industry with the fines totalling over VNĐ1.4 billion. During the first six months of 2024, however, 153 violations were reported with fines totalling over VNĐ2 billion.

He said the ongoing rampant smuggling and counterfeiting contributes significantly to the large price difference between illegal and legal products. There were still segments in the market, typically made up of low-income populations, who still preferred cheaper but questionable quality products.

He stressed the importance of a coordinated effect by ministries and governmental agencies in straightening up the market and reducing smuggling and counterfeiting. 

VBA President Nguyễn Văn Việt called for careful planning and implementation of the new tax, given the proposed increases, which according to him were significant. He said any new tax regimes should be studied and revised thoroughly in consideration of Việt Nam’s market characteristics.

Dr Nguyễn Quốc Việt from the Việt Nam from the Institute for Economics and Policy Research said that the tax rate should be set to allow for a way to regulate consumption, but introduce minimal disruptions to production.

Việt proposed setting a temporary tax rate given the economy has still been in recovery since the COVID-19 pandemic. This should ensure a balance of interests among the State, businesses and consumers while monitoring the effectiveness of new policies.

The country has imposed a special consumption tax on 11 commodities including cigarettes and cigars, various types of alcohol, beer, cars with fewer than 24 seats, petrol and petrol additives, air conditioners up to 90,000 BTU, playing cards, votive papers, motorcycles over 125cc, aeroplanes and yachts.

The law, initially introduced in 2008, had been amended four times previously as the Government adapted to regulate consumption, conserve resources, protect the environment and bolster the State budget.

The new draft law proposed two options to increase the tax for beers and alcoholic beverages. The first option will see the tax rate raised by over 5 per cent by 2026 with prices potentially increasing by 10 per cent compared to 2025. The second option will see the tax rate raised by over 15 per cent by 2026 with prices expected to increase by 20 per cent compared to 2025.

The MoF said it supported the second option. Tax could increase by 5 per cent a year in the next four years, leading to a potential increase of two to three per cent a year in prices, which would still be in line with inflation and increased income during the projected timeline.

According to the ministry, by 2030 the special consumption tax rate for beers and alcoholic beverages with alcohol content of greater than 20 degrees should double, or nearly double, the current rate. Products with an alcohol content of lower than 20 degrees could face a special consumption tax rate of 25-35 per cent higher. VNS