The Vietnam Beer-Alcohol-Beverage Association (VBA) has raised concern over the Ministry of Finance proposal to raise the special consumption tax on alcoholic drinks to 100% by 2030.
The association highlighted that the beverage sector has contributed significantly to the state budget, at nearly Dong 60 trillion (US$2.3 billion) annually. The recent pandemic has damaged the industry for several years destroying incomes while it takes years for the industry to recover to pre-pandemic level. As a result, the beverage sector’s inventories in 2023 surged 120% over 2022. Demand is yet to catch up with supply.
The ministry earlier proposed to increase the current excise tax of 65% to 80% in 2026 on beer, wine and spirits with alcohol content of at least 20%. This will eventually move to 100% by 2030.
For beverages with alcoholic content of less than 20%, the ministry proposed an increase of consumption tax from 35% to 50% by 2026, and to 70% by 2030.
The association felt the ministry might not be fully aware of the current dismal state of the beer industry, which has seen closure of breweries as well as production suspension, to warrant the proposed move. One example is Heineken which saw a double digit decline in consumption in 2023, the first such decrease in decades. Sabeco, which accounts for 34% share of the beer market, also reported a drop in revenue since 2021. Breweries are also facing higher cost of production amidst inflationary environment.
Meanwhile, the tax hike could also reduce competitiveness, lead to higher smuggling activities and production of fake goods.
The association suggested a more calibrated, gradual move to increase the special consumption tax for alcoholic drinks to 80% by 2030 instead of 100%.
The government, on the hand, wants to discourage high consumption of alcoholic drinks in the country. Vietnam is now the largest beer consumer market in Southeast Asia, and ranked 3rd just behind China and Japan in Asia.
