Proposal to impose excise tax based on alcohol concentration.

The draft Law on Special Consumption Tax (amended) is currently being widely discussed by the Ministry of Finance and will be debated by the National Assembly at its 8th session (October 2024) and passed at its 9th session (May 2025). There are currently many noteworthy new points that have a significant impact on the beverage industry in general and alcoholic beverages in particular.

At the seminar "Ensuring Sustainable Benefits When Amending the Law on Special Consumption Tax on Alcoholic Beverages," Professor Hoang Van Cuong, a member of the National Assembly's Finance and Budget Committee, emphasized that this tax must be enacted; it is inevitable and cannot be delayed. When presenting it to the National Assembly, there must be sufficient basis and convincing grounds for the policy to be approved. Therefore, it is necessary to define the markets and the impacts on those market segments, such as the methodology and roadmap.

Based on observations of taxation in many countries, Ms. Dinh Thi Quynh Van - Chairman of PwC Vietnam - believes that the health effects of beer and wine are different and should not be grouped together. This is because wine has a higher alcohol content, while beer has an alcohol content of only about 5%, with some types exceeding ten degrees. Furthermore, consumer behavior regarding beer and wine is also very different.

"Most countries around the world tax beverages based on alcohol content, recognizing the clear harm to health. That is, the higher the alcohol content of beer or wine, the higher the tax. However, in reality, beer products with lower alcohol content and less health harm are often more expensive, sometimes resulting in higher taxes compared to products with higher alcohol content."

Currently, the Law on Prevention and Control of Harmful Effects of Alcohol and Beer stipulates different alcohol content levels for beer products (below 5.5 degrees, from 5.5 to under 15 degrees, and above 15 degrees). Considering alcohol content as a harmful factor and tax policy as an effective tool to regulate consumer behavior and steer the use of high-quality, low-alcohol products to avoid health risks, many opinions suggest levying a relatively balanced tax on beer based on alcohol content, instead of a flat rate as before (65%)" - Ms. Van proposed.

Dr. Nguyen Quoc Viet, Deputy Director of the Vietnam Institute for Economic and Policy Research (VEPR), affirmed that for a tax policy in general, and excise tax in particular, to be effective and achieve its expected goals, the unity and harmony of all stakeholders, especially consumers and producers, are extremely important. Otherwise, it could lead to transfer pricing or manipulation of input prices to evade taxes without impacting consumer behavior.

The impact needs to be assessed with specific numbers and compelling evidence.

According to Professor Hoang Van Cuong, using excise tax on alcoholic products aims to change behavior. However, simply changing behavior due to the impact of price on tax alone won't bring about significant changes because alcoholic products are inelastic. Therefore, communication and public awareness campaigns are necessary. The goal is to ensure that each tax change impacts the media, public awareness, and consumer behavior.

He stated: "It is necessary to ensure a balance of interests for consumers to promote better consumption behavior, and for manufacturers to strive for higher quality, stricter standards, and greater safety. Taxation tools will force manufacturers to choose this change. The excise tax is not primarily aimed at increasing budget revenue, but changes in tax policy cannot be intended to reduce budget revenue. Things that require impact assessments with specific figures and convincing evidence will be more easily approved by the National Assembly."