Vietnam's beer industry is sounding alarms over the government's recent proposal to significantly increase excise taxes on alcoholic beverages. The plan, put forward by the Ministry of Finance (inside.beer, 14.6.2024), aims to raise the excise tax on beer and spirits to 100% by 2030, up from the current rates of 65% for beer and spirits with an alcohol content of 20% or above. This proposed tax hike is part of a broader effort to reduce alcohol consumption and improve public health in the country.
The proposal has met with strong opposition from local beer producers, who argue that the tax increase will have severe negative impacts on the industry. Nguyen Thanh Phuc, Director of Public and Government Affairs at Heineken Vietnam, highlighted the potential economic repercussions during a recent seminar. He pointed out that the beer industry, which has already been struggling with declining sales and profits, would suffer "very negative" impacts if the tax hike is approved. Heineken, along with other major players like Sabeco and Habeco, has seen significant downturns in sales, with some factories facing closures due to the financial strain.
Industry experts warn that the steep tax increase could lead to a rise in beer smuggling and adversely affect the supply chain, tourism services, and agriculture. The Vietnam Beer - Alcohol - Beverage Association (VBA) has urged the government to reconsider the timeline for the tax hike, suggesting a more gradual approach to avoid shocking the market. They propose maintaining the current tax rate for an additional three years, followed by incremental increases of 3-5 percentage points every three years.
Moreover, tax expert Nguyen Van Phung argued that alternative measures, such as stricter enforcement of existing laws against drunk driving, could be more effective in curbing alcohol consumption than tax hikes. He cited data showing that despite previous tax increases, alcohol consumption in Vietnam has continued to rise, suggesting that higher prices may not significantly deter consumers.
The Ministry of Finance, however, remains firm on the necessity of the tax hike, emphasizing its alignment with international standards and public health goals. They estimate that the increased taxes could generate an additional VND 2.4 trillion (USD 94 million) in revenue in the short term, which would support public health initiatives and other government programs.
As the debate continues, the beer industry is bracing for potential challenges ahead, balancing economic stability with the government's health objectives. The outcome of this proposal will have significant implications for Vietnam's beer market and its broader economic landscape.
