Vietnam: Ministry of Finance does not take into account Heineken’s suggestion for a hybrid tax calculation for beer

In its latest draft on excise tax, Vietnam’s Ministry of Finance has not taken into account Heineken’s suggestion for a hybrid tax calculation for beer, The Investor reported on August 3.

In general, there are three taxation methods – ad valorem tax (proportional to the value of the underlying asset), specific tax (constant figure), and hybrid tax as a mixed formula between ad valorem tax and specific tax.

Heineken was the only premium beer brand to make such a proposal, the ministry noted. Many businesses and agencies opposed the suggestion and wanted continuity of ad valorem tax calculation for excise duties.

The ministry clarified that hybrid tax calculation would put heavy pressure on affordable products, prompting a price hike that’s “much more” than a hike in premium product prices.

As affordable products account for 80% of the Vietnamese market, such a recommendation was not suitable at the moment, it argued.

The ministry also did not take into account another suggestion from Heineken regarding different tax rates based on alcohol concentration in beers.

In particular, Heineken had suggested a 65% tax for beer with alcohol concentration of 5.5% or below, 70% for beer with alcohol concentration of 5.5-15%, and 75% for beer with alcohol concentration of 15% or more.

Per Vietnam’s commitment with the World Trade Organization (WTO), the excise tax rate has to be the same for all kinds of beer, regardless of their alcohol concentration, the ministry noted.

In July 2023, The Investor had held a workshop on calculating excise tax that was attended by major beermakers in Vietnam including Heineken, Sabeco, Habeco, and Carlberg.

Bennet Neo, then Sabeco CEO, said that “Vietnam should continue to maintain the ad valorem tax method and adjust the tax rates according to a suitable roadmap based on the socio-economic situation, at least for the next 10 years.”

Echoing Sabeco, Carlsberg Vietnam CFO Thieu Hong Nhung also opined that the ad valorem tax method should be maintained in the coming time.

Pham Thu Thuy, chief accountant at Hanoi-based brewery Habeco, was also on the same page regarding application of the ad valorem tax method.

In its latest draft, the finance ministry has proposed two options for raising the excise tax on beer.

The preferred option, based on higher effectiveness in reducing consumption and other negative impacts, is to increase the tax rate to 80% in 2026, 85% in 2027, 90% in 2028, 95% in 2029, and 100% from 2030 onwards. The current tax rate is 65%.

06 August, 2024