Vietnam’s government is debating whether to increase the special consumption tax on alcohol, cigarettes and soft drinks, a move aimed at increasing state revenue and discouraging alcohol consumption among problem drinkers.
Vietnam’s public debt has fallen recently but the government has expressed a desire to reform its revenue collection practices, with tariffs reduced by free-trade deals and the government under pressure to invest domestically.
Moreover, a study in 2016 estimated that 12% of all deaths in Vietnam are associated with alcohol use, while a fifth of deaths from road crashes were caused by alcohol use.
Increasing the tax on alcohol would appear to provide a solution to both of these issues.
A recent report estimates that the beer sector in Vietnam is worth $26bn, the highest in Southeast Asia. This translates to average beer consumption per person in Vietnam of 47.6 liters (12.4 gallons), the third-highest in Asia after China and Japan.
It should also be noted that alcohol prices in Vietnam remain among the lowest globally.
The Vietnam Beverage Association (VBA), which represents the industry, believes that higher taxation would not achieve the goal of reducing consumption and protecting health. They have argued that any increase in a special tax will negatively affect the market, especially during the pandemic recovery period.
The Association wants the government to delay any increase in the special consumption tax until at least 2024, and even then, it will lobby for only a slight uptick in rates.
In an official letter sent to the government on the 20th March the VBA outlined the pressures on the industry, including raw ingredients price increases due to the Russia-Ukraine war and the slow pick-up of the market.
Heineken’s CEO, Dolf van den Brink, met with Vietnamese Prime Minister Pham Minh Chinh during the latter’s official visit to the Netherlands last December. No details from the meeting were published, but following the meeting, Chinh said Hanoi aimed to improve its tax policy in the spirit of “harmonious benefits, shared risks” according to a government statement.
Heineken is one of Vietnam’s largest players in the alcohol industry, alongside Thai, Japanese and other local brewers. However they declined to comment on the matter, citing the Vietnam Beverage Association as leading the discussion and media engagement on behalf of all businesses in the alcohol industry.
Heineken Vietnam has invested about $1 billion in Vietnam and have announced plans to invest an
additional $500 million.
In 2020 they were ordered to pay $37.9 million in back taxes and fines and last September Heineken opened its latest brewery in Vietnam, the Heineken Vietnam Vung Tau Brewery. With a brewing capacity of 11 million hectolitres it is the largest brewery in Southeast Asia.
