Hanoi (VNS/VNA) - A draft proposal to increase specialconsumption tax on alcoholic beverages may hurt the Vietnamese beverageindustry's ability to compete on their home turf, putting the entire supplychain at risk, said industry insiders.

Lam Du An, Deputy General Director of the SaigonBeer-Alcohol-Beverage Corporation (SABECO), said since 2021, the company'srevenue has decreased by 10-15% compared to 2019. The company reported a 7%decrease in revenue in 2022 and an 11% decrease in revenue in 2023, with apre-tax profit decrease of 23%.

An said: "Input costs and raw materials including prices forhops, cans and bottle caps, various auxiliary materials, and transportations,among others, have increased significantly. Producers are facing input costincreases of 20%-40% while consumption demand has been in sharp decline andprices cannot be increased further."

Dau Anh Tuan, Deputy General Secretary of the Vietnam Chamber ofCommerce and Industry (VCCI) and head of the VCCI’s Legal Department, said thatthe industry has been struggling to recover from the COVID-19 pandemic andglobal geopolitical tension. Meanwhile, there has been talk among lawmakersthat sugary beverages should be the next in line to be subjected to a specialconsumption tax.

Vice Chairman of the Vietnam Association of Financial Investors(VAFI) Nguyen Hoang Hai said that paying additional tax will erode Vietnamese beveragemakers' competitive advantages. Over the long term, it can hurt their abilityto invest in new technologies or expand production. To make matters worse, itmay allow foreign players to swoop in to claim additional market shares fromdomestic players.

"It is well-known there is rampant tax evasion in the informalsector of the industry," Hai said.

"Some companies deliberately lowered their sales to keep taxlow. Now adding a tax on low-priced beverage products will encourage more taxevasion."

Representatives from the industry have long called for greatersupport from the National Assembly and the Government so that any new taxpolicies will be studied and reviewed carefully to ensure fairness and balanceto all players, given the market's conditions.

Nguyen Duy Hung, Vice Chairman of the VBA, expressed concerns overthe potentially severe impacts on the industry's supply chain and consumers.

He said: "The Vietnam Beer-Alcohol-Beverage Association (VBA)proposes that the National Assembly and the Government consider delaying theamendment of the Special Consumption Tax Law until at least 2025, to createconditions for Vietnamese beverage makers to recover, stabilise and graduallydevelop."

Hai said introducing new tax policies without careful study and considerationof the market conditions could lead to a situation in which few companies willbenefit while damaging the State budget and consumers' interests.

"The mixed tax regime may not be a suitable method for Vietnam.Considering the reality of its market conditions, I believe the most feasible,simple, and fair method is applying relative tax rates for beverageproducts," Hai added.

In a recent research by the Central Institute for EconomicManagement (CIEM), a 10% increase in tax can significantly reduce theindustry's output.


Nguyen Thị Minh Thao, head of CIEM's Department of Business Environment andCompetitive Capacity Research, said the proposed trajectory for increasing taxby the Ministry of Finance gives little time for the industry to prepare andshould be studied further./.