Vietnam: Vietnam Beer-Alcohol-Beverage Association requests amendments to draft on special consumption tax

Although the Vietnam Beer-Alcohol-Beverage Association supports the government's policy on amending the special consumption tax, it has suggested a reduction in the amount of tax to be increased and a reasonable extension of the timeline to stabilise the market, the Vietnam Investment Review reported on August 14.

At a conference themed, 'Tax Amendments to Promote Business Activities' hosted by VIR on August 14, Chu Thi Van Anh, vice-president and general secretary of Vietnam Beer-Alcohol-Beverage Association (VBA), gave the alcoholic beverage industry's perspective on the government's proposed increase in special consumption tax.

For alcoholic beverages such as beer and liquor, the Ministry of Finance (MoF) is currently considering two options for increasing the special consumption tax: a substantial immediate increase or a gradual increase. They are leaning towards the second option, which proposes a steady annual rise in tax rates starting in 2026, aiming to reach 100 per cent by 2030.

"The proposed increases are the highest in history, and businesses are unable to fully assess the potential impacts yet. The VBA recommends a gradual increase for alcohol based on three goals: health, economic and social impact, and historical context," said Van Anh.

For the economic and social goals, a comprehensive assessment of the beverage industry's overall value is required. The VBA also highlighted, according to their survey, one direct job in a brewery generates over 50 indirect jobs in the supply chain, including logistics, services, and trade.

From a historical perspective, policies are implemented in different contexts. Currently, the beverage sector in Vietnam is still struggling and has not yet fully recovered, making a continuous increase in special consumption tax inappropriate at this time.

"The VBA proposes a gradual increase for alcohol, starting with a 5 per cent increase in the first year, followed by a 5 per cent increase every two years. This would give businesses time to adjust their production and operations without significant disruption, while balancing objectives and adapting to the specific context," she added.

For sugary drinks, the association suggests that the MoF reconsider including them in the special consumption tax due to the ongoing debate about the scientific evidence linking sugary drinks to obesity and related health issues.

The VBA’s representatives also raised four concerns over the proposed adjustments to the special consumption tax. First, the MoF's reliance on WHO recommendations do not adequately address Vietnam's specific situation, where the informal alcohol market is substantial, and the beverage industry faces significant existing challenges.

The impact assessment report from the MoF is also incomplete, focusing more on qualitative aspects and lacking quantitative analysis of impacts on direct and indirect stakeholders, as well as effectiveness in achieving health, budgetary, social, and labour goals.

Moreover, high tax increases pose health risks by widening the gap between legal and illegal products, potentially driving consumers towards cheaper, lower-quality, or counterfeit products.

For sugary drinks, the scientific evidence supporting their connection to health issues like obesity is still debated, and further discussion is needed before including them in the special consumption tax framework.

14 August, 2024