Liquor industry wants tax increase delayed
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Liquor companies want the proposed increase in special consumption tax put off until they recover from the effects of the Covid-19 pandemic. The government plans to hike the taxes on beer, liquor, and cigarettes from now until 2030 and is still considering by how much.
The current rates are 65 percent on beer and 35-65 percent on liquor. Nguyen Van Viet, chairman of the Vietnam Association of Beer, Wine and Beverages (VBA), said the two years of Covid caused beer sales to drop by 20 percent or one billion liters.
Around half of all breweries and distilleries saw revenues and profits fall in 2020 and 2021, according to a survey by the Central Institute for Economic Management (CIEM). Over 79 percent of them tried to cut costs, and 58 percent postponed expansion plans and laid-off employees.
It is estimated that 4-7 percent of workers were laid off, and the rest saw their incomes reduce by 7-10 percent. Though the situation has improved thanks to the reopening of the economy this year, the industry is unlikely to see profits rise as input costs have risen to historic highs.
Gasoline and malt prices have increased by 50 percent, and that of beer cans by 30-40 percent. Holly Bostock, corporate affairs director of Heineken Vietnam, said any increase in special consumption tax would add to the burden on the beverage and tourism industries, while what they need now are stability and support.
Phan Tuan Khai, a lawyer for the VBA, said the government needs to come up with a new tax mechanism that would help businesses but also generate more tax instead of just increasing the rates. Economist Ngo Tri Long said a tax hike would exhaust businesses.
Long said a new mechanism that taxes products with higher alcohol content more would be fairer and more transparent than the current tax mechanism and encourage people to drink responsibly. Taxation by alcohol content is done in Singapore and European Union countries.
A study by the CIEM from 2010 to 2018 found that despite increases in alcohol tax, consumption actually rose from 6.6 liters per capita per year to 8.3 liters.
A 2019 study by Lancet, a British medical journal, found Vietnam among the world’s top beer-consuming countries and a 90.2 percent rise in drinking per capita between 2010 and 2017.
Questions & Answers
Q.What impact did the Covid-19 pandemic have on beer sales specifically?
What impact did the Covid-19 pandemic have on beer sales specifically?
Beer sales dropped by 20 percent, which equates to one billion litres, during the two years of the Covid-19 pandemic. This data was provided by the chairman of the Vietnam Association of Beer, Wine and Beverages.
Q.What challenges are liquor companies facing currently that make them request a tax delay?
What challenges are liquor companies facing currently that make them request a tax delay?
Despite economic reopening, companies face historic highs in input costs, such as a 50 percent rise in gasoline and malt prices, and a 30-40 percent increase for beer cans. This prevents profit recovery.
Q.What alternative tax mechanism has been suggested by an economist?
What alternative tax mechanism has been suggested by an economist?
An economist proposed a new mechanism that taxes products based on their alcohol content. This system is seen as fairer, more transparent, and would encourage responsible drinking, similar to practices in Singapore and EU countries.
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