Nguyen Van Viet, Chairman of the Vietnam Beer-Alcohol-Beverage Association

According to Oxford Economics, the beer industry contributes $555 billion to global GDP, creates 23 million jobs, and paid $66 billion in taxes to governments worldwide in 2019. Although the beer industry only accounts for about 3 percent of the total workforce, every direct job at the factory creates about 50 indirect jobs in the supporting supply chain.

In the draft law as amended by the Ministry of Finance, the impact assessment did not fully mention the position and key contributions of the beverage industry to society and the economy, the areas directly and indirectly affected (consumers, investment environment, labour force, competitiveness of companies) and the protection of public health.

A tax increase will create disadvantages and barriers between domestically produced and imported goods, while domestic enterprises will face numerous capital difficulties, high production costs and narrowed markets. This is an extremely important legal framework for the beverage industry, and therefore we hope that the Ministry of Finance will carefully consider it based on practical situations, scientific basis and comprehensive impact assessment.

Since 2020, the alcohol beverage industry has continuously suffered from the impact of the pandemic, global political conflicts and the policy of restricting alcoholic beverages, which has led to an alarming decline in many indicators of production, sales and profits of manufacturers. It has been subjected to numerous restrictions by at least four major laws, and measures to support the reduction of VAT are not applied to the industry.

Consumer demand has fallen because people’s incomes have been affected following the pandemic. Restaurants and hospitality businesses have all reported a sharp decline in customer numbers, leading to closures or downsizing and layoffs, affecting the entire supply chain, even in the tourism and agriculture sectors.

Meanwhile, raw material prices for the beverage industry have increased by 15-30 percent compared to 2021. The inventory index for the entire industry is estimated to have increased by 120 percent in 2023 compared to 2022. An increase in the inventory index of almost 128.9 percent was also reported in the second quarter of 2024.

Alcohol companies are also fighting against alcohol of unknown origin, which accounts for almost 70 percent of alcohol consumption, which leads to loss of revenues to the state budget, affects human health, and also damages the production and business of legal companies. Numerous policies and draft laws on VAT, advertising and increasing the minimum wage increase production costs.

In addition, starting this year, companies will have to meet binding policy commitments to protect the environment, use environmentally friendly raw materials, protect the environment and reduce greenhouse gas emissions.

The World Health Organization (WHO) recommends raising the price of alcohol by at least 10 percent, thereby increasing the tax rate on alcohol to 80 percent in 2026 and 100 percent by 2030. The WHO also makes general recommendations for countries with different development rates and is not specifically limited to Vietnam.

The proposals must be based on the current situation in Vietnam and evaluated accordingly. Feasibility studies must be carried out when implementing them. The WHO recommendations are therefore only for reference. The proposal to increase taxes in this important policy area must include practical research and an implementable roadmap.

If tax increases drive up product prices, consumers are more likely to switch to cheaper products or even counterfeit goods. Tax increases reduce the competitiveness of domestic products. International experience shows that high tax increases create a large gap between legal and illegal products. This will increase the number of smuggled goods, potentially posing many health risks and incurring costs for market management authorities.

Too many private companies produce beer products that imitate big brands and sell them on the market at very cheap prices, which are almost equal to the production cost without taxes. The estimated production of these branded beer products is about 200 to 300 million liters. The association hopes that the drafting committee will draw on more international experience, especially lessons from neighboring countries with similar conditions to Vietnam, such as China and Thailand, to address this problem.

In addition to raising taxes, solutions must be explored and implemented and the fight against smuggling, counterfeiting, substandard goods and goods of unknown origin must be strictly enforced in order to protect legitimate businesses, avoid budget losses and protect consumer health.