Leaders of some businesses and associations have shared this concern when discussing one of the important factors to consider in decision-making. With large investment capital, which can amount to tens or hundreds of millions of USD, businesses need stable tax policies for at least 3-5 years to ensure financial resources for investment and to balance costs.

With tax policies having a significant impact on the operations of businesses and associations, such as excise tax, it is necessary to seek the opinions of businesses and associations.

Conversely, when a policy with significant impacts on business operations, such as the excise tax, is continuously adjusted, it can not only create unease among businesses but also affect the image of Vietnam's investment environment in the eyes of foreign investors.

Businesses Need Stability

Post-COVID-19, along with the effects of geopolitical issues, global economic recession, and supply chain disruptions, alcohol and beer businesses have faced numerous difficulties and slow recovery. At this time, the Ministry of Finance is gathering feedback on the draft amendment to the Excise Tax Law, aimed at regulating consumption and curbing alcohol/beer abuse.

However, the proposed rapid and significant tax increases in the draft are raising concerns that it may create a "double hardship" situation for businesses and workers in the industry, as well as related sectors. "Businesses have not yet fully assessed the major impacts of the proposed changes related to the excise tax," said a representative of the Vietnam Beer, Alcohol, and Beverage Association.

Ms. Nguyễn Thị Cúc, Chairwoman of the Vietnam Tax Consultants Association and former Deputy Director-General of the General Department of Taxation, supports the viewpoint of adjusting the tax rate by percentage for alcohol and beer according to the current calculation method in a phased approach during the 2026-2030 period. The goal is to increase the price of alcohol and beer, limit consumption, and contribute to reducing the harmful effects of excessive alcohol consumption; ensuring public health and social security. However, according to Ms. Nguyễn Thị Cúc, it is necessary to carefully study the rate of tax increase as well as the reasonable timeline to maintain business operations and employment within the supply chain, helping businesses and consumers gradually adapt to the tax increases by 2030, and avoid the shock of a sudden, rapid rise.

At many seminars, experts and businesses agree that the draft amendment to the Excise Tax Law needs to help businesses and consumers adapt to gradual tax increases.

A representative of Saigon Beer-Alcohol-Beverage Corporation also supports the view that responsible alcohol and beer consumption regulations must continue to be emphasized in business activities and the decision to maintain the current tax calculation method. However, businesses are concerned that the proposed excise tax increase, if implemented, would be an unprecedented "shock" to the beer and alcohol industry and would have negative impacts.

Concerns About Unwanted Consequences

Mr. Bùi Ngọc Tuấn, Deputy General Director of Deloitte Vietnam Tax Consulting, believes that the proposed rapid increase in excise tax rates for alcohol and beer will affect production and consumer behavior. With around 60% of alcohol and beer consumption in Vietnam being illicit, a rapid tax increase may lead consumers to switch to cheaper, lower-quality homemade products.

According to estimates by the Central Institute for Economic Management (CIEM) in early 2022, alcohol from the informal sector, specifically homemade and smuggled alcohol, is estimated to be around 385 million liters per year, with no tax revenue collected by the state. Of this, homemade alcohol accounts for 70-90%.

Excessive Tax Increases May Lead Consumers to Switch to Cheaper, Lower-Quality Homemade Products (Illustrative Photo)

Furthermore, based on historical data, Mr. Nguyen Van Phung, former Head of Large Enterprise Tax Management (General Department of Taxation, Ministry of Finance), suggests that significant increases in excise tax have not effectively changed consumer behavior. Data from the Vietnam Beer, Alcohol, and Beverage Association and the General Department of Taxation from 2003 to 2016 show that per capita beer/alcohol consumption increased from 3.8 liters per person per year to 6.6 liters per person per year between 2008 and 2010.

By 2016, during the peak of the recent economic growth period, this consumption level reached 8.3 liters per person per year. Thus, from 2003 to 2016, the per capita consumption of beer and alcohol more than doubled. The percentage of people using alcohol and beer during this period increased from 1.4% to 14%, a tenfold rise.

During this same period, the tax on alcohol and beer increased significantly, but it did not effectively adjust consumer behavior. Therefore, this expert believes that increasing excise tax does not alter consumer behavior; rather, changes in consumer behavior are more influenced by Decree 100.

Administrative measures appear to be more effective than tax changes. The former Head of Large Enterprise Tax Management suggests that administrative measures should be extended, as they have a much stronger impact compared to tax tools.

From the perspective of the business community, Mr. Dau Anh Tuan, Deputy Secretary-General and Head of the Legal Department of VCCI, asserts that the amendments to the Excise Tax Law will have a significant impact on businesses, associations, and consumers involved in the production, trade, and consumption of the affected goods and services. Therefore, it is crucial to seek input from these stakeholders.

Mr. Bui Ngoc Tuan, Deputy General Director of Deloitte Vietnam Tax Consulting, agrees that the drafting committee should closely collaborate with businesses and associations to conduct surveys and quantitative assessments with specific data on the impact of the draft on Vietnam's socio-economic landscape. This will not only help make more informed policy decisions but also ensure feasibility and effectiveness in implementing the new excise tax policy.

Based on a comprehensive impact assessment, the drafting committee should consider a more extended timeline for tax increases on alcohol, beer, and tobacco; apply a lower excise tax rate than currently proposed to ease the financial burden on businesses in the industry, especially given the current economic challenges.