Chu Thi Van Anh, general secretary of Vietnam’s brewers group recommends a gradualist approach to tax rises

At a conference on August 14 entitled Tax Amendments to Promote Business Activities, hosted by the publication Vietnam Investment Review, Chu Thi Van Anh, vice-president and general secretary of the Vietnam Beer-Alcohol-Beverage Association (VBA), outlined the brewing industry’s perspective on the government’s proposed increase in special consumption tax.

The new draft law proposes by Vietnam’s Ministry of Finance (MOF) suggests two options to increase the tax for alcoholic beverages. The first would see the tax rate raised by more than 5% by 2026, with prices potentially increasing by 10% compared to 2025. The second option would see the tax rate raised by more than 15% by 2026, with prices expected to increase by 20% compared to 2025.

The VBA, however, believes that is far too rapid for the industry to sustain.

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

In respect of economic and social goals, a comprehensive assessment of the beverage industry’s overall value is required, recommends Van Anh, noting that a recent VBA survey found that one direct job in a brewery generates more than 50 indirect jobs in the supply chain, including in logistics, services and trade.

Moreover, from the historical perspective, the beverage sector in Vietnam is still struggling and has not yet fully recovered from the impact of the Covid-19 pandemic, making a continuous annual increase in special consumption tax inappropriate at this time.

“The VBA proposes a gradual increase for alcohol, starting with a 5% increase in the first year, followed by a 5% 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,” Van Anh recommends.

VBA representatives speaking at the conference also raised other areas of concern over the proposed adjustments to the tax. First, the MoF’s reliance on the World Health Organization’s general recommendations does not adequately address Vietnam’s specific situation in which the informal alcohol market is substantial, and the beverage industry faces significant existing challenges.

Second, 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.

Third, 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.

The aim of the conference was to gather opinions to help provide a multidimensional perspective to the amendments to the Special Consumption Tax Law, which are being drafted by the Ministry of Finance. The amendments are expected to be debated at the National Assembly’s eighth session in October-November 2024, and finally approved in May 2025.