Vietnam: Vietnam considering luxury tax on alcohol

In late June, Vietnam’s Ministry of Finance (MOF) submitted to the government a proposal on amending the luxury tax law, VietNamNet reported on July 30.

Several days later, a workshop on collecting opinions about the proposal was held, drawing public interest. While many enterprises and experts applaud the amendment, others have raised questions about the time of application and the new tax calculation method.

Nguyen Van Viet, chair of the Vietnam Beer Alcohol Beverage Association (VBA), said the beverage industry serves daily demand and attaches importance to cultural values, and develops alongside increased living standards, and tourism and trade development.

Viet said the sector is affected by transport from other countries, and businesses are witnessing a decline of up to 15-20 percent.

“In such conditions, we hope the state doesn’t think of raising tax rates at this time, and the tax increase should not be mentioned until after 2025 so that enterprises have time to recover production,” Viet said.

The representatives of some enterprises, while agreeing with the solution, asked to reconsider the time of application. They said the tax rate is already relatively high, and unfairness exists for beer products with different alcohol concentration levels.

The beer products with lower alcohol concentration levels are less harmful to users but bear higher tax rates than products with a higher alcohol level.

Analysts say that in order to create products with high quality, manufacturers need to increase investment (use more expensive input materials, set up more advanced production lines) to create products with lower alcohol level and less harm. However, ironically, they are taxed more heavily.

Analysts said a mixed tax would be the solution to the current problem and would help promote the development of beer production in Vietnam.

With the mixed tax method, the relative tax component will allow tax costs to be automatically adjusted according to inflation when product prices increase.

When raising selling prices, the luxury tax cost on output will remain unchanged, so enterprises can offset the increased production costs.

Lawyer Nguyen Thi Quynh Anh, deputy chair of the Vietnam Bar Association, said, when adjusting the luxury tax on alcoholic drinks, policymakers need to aim for three factors: regulate consumption, reduce negative impact on people’s health; ensure revenue for the state budget; and protect the domestic industry.

31 July, 2023