TAX INCREASES ON ALCOHOLIC BEVERAGES SHOULD STRIKE A BALANCE: ECONOMISTS

The tax increases on alcoholic beverages should strike a balance between curbing consumption to protect the public's health and hindering the beverage industry, said industry experts and policymakers.

Three tax laws, including the Corporate Income Tax Law, the Value-Added Tax Law, and the Special Consumption Tax Law, have been under review and are expected to be amended in a direction that will significantly raise taxes for the industry.

Among these, a draft amendment to the Special Consumption Tax Law is expected to be presented to the National Assembly next month and can be approved as early as May next year. The tax has been reported to take an upward trajectory, taxing alcoholic beverages starting from 2026, reaching as high as 100 per cent by 2030.

The amendment proposed two scenarios, with the Ministry of Finance preferring alcoholic beverages with alcohol content of 20 per cent or higher having their taxes increased by 80 per cent by 2030. Meanwhile, alcoholic beverages with an alcohol content of 19 per cent or lower will have their taxes increased by 50-70 per cent. Beers will also see a gradual tax increase from 80 per cent to 100 per cent.

Head of the Department of Business Environment and Competitiveness at the Central Institute for Economic Management Nguyễn Minh Thảo, said the government must raise the tax to curb consumption of alcoholic beverages, which are harmful to public health if consumed irresponsibly.

On the other hand, excessive taxes could result in increased smuggling and counterfeiting activities, possibly leading to the formation of illegal markets, which may cause significant harm.

She said the amended taxes could have a far reaching negative impact on as many as 24 industries and sectors, including hospitality and food, potentially hurting the Southeast Asian economy's position as an attractive foreign investment destination.

"Fair competition can only be assured in a fair and transparent market, which has clear and well-established standards and regulations to limit counterfeiting," she said.

VP and secretary-general of the Vietnam Beer, Alcohol, and Beverage Association, Chu Thị Vân Anh, said the new regulations, once passed, could pose major challenges to the industry.

"As it is, many large players in the industry have had to lay off workers and scale down production. A tax hike as high as 100 per cent by 2030 is significant and businesses should have more time to assess the impact of a change of this magnitude," Anh said.

Economists and industry insiders have called for extra time to allow for smoother transition and allow business operations to adapt. They also proposed the tax hike should be delayed for beers and exemptions granted to non-alcoholic beers.

They said the tax hikes should not be implemented every single year, but, instead, every other year to allow businesses more time to plan and adapt to the new taxes. They called for a more scientific approach to determining the tax increases and the appropriate time for implementation to ensure a supportive environment for the industry.

Source: VNS