Nguyen Thi Cuc, Chairwoman of the Vietnamese Tax Consultants Association

Decision No. 508/QD-TTg of April 2022 approving the tax reform strategy until 2030 provides for the study and application of a combination of proportional and absolute tax rates on a range of goods and services subject to SCT in Vietnam.

Developed countries often impose a tax on a specific amount per litre of alcohol or a composite tax. Developing countries, on the other hand, often impose a composite tax and an ad valorem tax (the amount is based on the value of a transaction/goods). Countries such as Laos, Cambodia and Myanmar impose an ad valorem tax, as does Vietnam. Thailand used to impose an ad valorem tax but switched to a composite tax.

In Vietnam, during the process of collecting feedback on the draft law on SCT, there are different opinions on the method of calculating the tax. Some companies in the alcohol industry propose switching to a composite tax, while the majority of companies prefer to keep the current ad valorem tax. After collecting opinions from ministries, municipalities, associations, companies and independent experts, the drafting committee decided to calculate the tax using the ad valorem tax.

Based on the current business activity in the alcohol industry in Vietnam, I agree with the current draft law to impose a composite tax on tobacco products, while an ad valorem tax will be imposed on alcoholic beverages and beer products.

Resolution 508 provides for the review, study, amendment and supplementation of the laws subject to the SCT in order to regulate consumption in accordance with changing consumer trends in society and government guidelines.

In addition, the decision also stresses the need to develop a roadmap for adjusting and increasing taxes on tobacco, beer and alcohol products in order to limit production and consumption and meet international obligations. It also calls for a review and adjustment of SCT rates for certain products to adapt them to the economic and social conditions of this decade.

According to a 2023 decision, alcohol tax rates are to be increased by a percentage each year from 2026 to 2030 in order to achieve the World Health Organization’s recommended target of increasing alcohol prices by at least 10 percent.

Representatives of the Vietnam Tax Consultants Association fully agree with the perspective of increasing the SCT rates on alcohol by a percentage between 2026 and 2030 in order to achieve the goal of increasing prices, restricting consumption, contributing to reducing the harmful effects of excessive alcohol consumption and ensuring the health of the population.

However, we need to carefully consider the scale of the tax increase and work out an appropriate roadmap to ensure the continuity of production and business activities and the livelihoods of workers in the supply chain from raw materials to manufacturing, trade and food and beverage services. This will also create conditions for market stability and help businesses and consumers adapt to the gradual tax increase until 2030 and avoid sudden and rapid shocks.

Article 8 of the draft tax increase roadmap sets out a number of specific provisions. For items such as alcohol with an alcohol content of 20 degrees or more and beer, there are two options. The first is to adjust the tax rate to 70 percent in 2026, an increase of five percent from the current rate. This will be followed by a further increase of five percent each year until 90 percent is reached in 2030.

The second option is to adjust the tax rate to 80 percent in 2026, an increase of 15 percent over the current rate, followed by an annual increase of a further 5 percent, reaching 100 percent in 2030.

For alcoholic beverages with less than 20 degrees of alcohol, there are also two options. The first is to adjust the tax rate to 40 percent in 2026, which is an increase of 5 percent compared to the current rate. After that, there will be a further increase of 5 percent each year, reaching 60 percent by 2030. The second option is to adjust the tax rate to 50 percent, which is an increase of 15 percent. After that, there will be a further increase of 5 percent each year, reaching 70 percent by 2030.

On this basis, we propose to choose option 1 of the draft law and at the same time to extend the deadline for adjusting the tax rate by five percent annually to at least two years.

The SCT is an indirect tax included in the selling price of alcohol. In principle, an increase in the tax leads to a corresponding increase in the selling price of the products. However, limiting consumption depends not only on increasing the SCT, but also on the implementation of various other measures to achieve the goal.

The alcohol-driving regulations that have been tightened in recent years to punish traffic violations on the roads and on the railways have significantly reduced the number of drunk drivers and are proof of their effectiveness.

In addition to tax increases, authorities must strengthen their measures to control alcohol smuggling, especially of homemade or unverified products. This could lead to consequences such as illegal alcohol trade, lack of quality assurance and harm to the health of the population. Alcoholic beverages are produced using industrial methanol, which is toxic to internal organs, the nervous system and eyesight and can be fatal. Home-brewed alcohol must meet quality standards, obtain production and business registration and pay SCT and VAT.

We expect that the calculation and determination of the SCT policy in this tax law amendment will aim at a more balanced approach to protecting public health, ensuring business stability, providing jobs for workers and generating revenue for the state budget.