The Ministry of Finance has announced the draft Law on Special Consumption Tax (amended) and is expected to submit it to the National Assembly for approval in May 2025. The Ministry of Finance proposes to increase special consumption tax on alcohol and beer products, and add sugary soft drinks to the list of subjects subject to special consumption tax.

Accordingly, the draft proposes to increase tax rates according to a roadmap of continuous annual increases until 2030 for alcohol and beer products and add soft drinks according to Vietnamese standards with sugar content over 5g/100ml to the list of subjects subject to special consumption tax.

The draft proposes two options. Option 1, the special consumption tax on beer and wine above 20 degrees will increase from 2026 to 70%; 2027 to 75% and increase by 5% each year until 2030 to 90%. For wine below 20 degrees, it will increase to 40% in 2026 and increase by 5% each year until 60% in 2030.

Option 2, special consumption tax on beer and wine above 20 degrees will increase to 80% in 2026 and increase by 5% each year until 100% in 2030. For wine below 20 degrees, it will increase by 50% in 2026 and increase by 5% each year until 70% in 2030. Currently, the Ministry of Finance is leaning towards option 2.

Ms. Nguyen Minh Thao said that if 10% special consumption tax is applied to the beverage industry, about 2,000 workers will lose their jobs.

Assessing the impact on businesses in particular and the entire economy in general, Ms. Nguyen Minh Thao - Head of the Department of Business Environment and Competitiveness Research, Central Institute for Economic Management (CIEM) gave very specific research figures from CIEM.

Specifically, if calculated at a tax rate of 10% for alcohol, beer and soft drinks, in the first year, revenue from special consumption tax will increase. But starting from the second year, revenue will begin to decrease.

“If we take the 2022 figures, we also calculate that the revenue from this tax increase will decrease by 0.5% from the second year (ie a decrease of 5.5 trillion). This will lead to revenue from the beverage industry and 24 related industries. This means that corporate income tax will decrease by about 3.38 trillion VND,” Ms. Thao commented.

Regarding the two options of increasing high taxes on alcohol and beer, according to Ms. Thao, the drafting committee has not yet fully assessed the impacts and reported on the impact on businesses. The drafting committee has only mentioned the increase in budget revenue without any quantitative assessment of the level of impact and specific impact on the reduction in output and revenue of businesses.

At the same time, the drafting committee has not yet made an assessment of the impact on labor and social security. What is the impact on related industries in the supply chain and services?

According to Ms. Thao, if a 10% tax is applied to sugary soft drinks, the elasticity of labor in this sector will decrease to 1.03%. This means that the production scale of sugary soft drink manufacturing and trading enterprises will be significantly reduced.

“More specifically, for the economy-wide impact, the application of a 10% tax on sugary soft drinks will impact 24 industries. If calculated based on GDP in 2022, the economy's GDP will decrease by 0.5% (about 27.8 trillion).

This also leads to a decrease in revenue of the beverage industry and 24 related industries of about VND3.38 trillion in tax revenue for the State budget. We estimate that the reduction of VND3.2 trillion will start immediately after the application of special consumption tax on sugary beverages,” said Ms. Thao.

Also according to the Head of the Department of Business Environment and Competitiveness Research, CIEM, in the Draft Law on Special Consumption Tax (amended), the Ministry of Finance only said that the purpose of the draft is to increase revenue, regulate consumers, and regulate income, but there is no specific quantitative figure of how much and how. This is only a preliminary study.

“If 10% special consumption tax is applied, it will directly affect the labor force in enterprises, reducing about 2,000 workers. We are proposing a tax rate of 5%. If this tax rate is applied, the first year the revenue will increase, the second year will start to decline but at a smaller level, more suitable to the current business context,” said Ms. Thao.

Galaxy