Changes in consumer behaviour and lifestyle have resulted in the consistent shrinking in the average profit margins of the industry. — VNA/VNS
HANOI: Economists and industry experts have called for caution before raising Vietnam’s special consumption tax on beers and alcoholic beverages, pleading with regulators to consider the long-term effect it may have on the budget.
Dr Can Van Luc, chief economist at BIDV and director of BIDV Training and Research Institute, said the current global economic picture shows a declining trend in drinking, with a slow recovery following the lockdowns.
Meanwhile, economic recovery in Vietnam from 2020 to 2024 has not been evenly realised.
Changes in consumer behaviour and lifestyle have resulted in the consistent shrinking in the average profit margins of the industry.
A 12% decrease in 2021, a 6% decrease in 2022 and an estimated 10% to 12% decrease in 2023 compared with the previous year.
“The impact of the amended Special Consumption Tax Law could increase national budget revenue in the short term, but in the medium to long term, it may reduce consumer demand, decrease business revenue and profits, and thereby reduce value added tax (VAT) and corporate income tax revenue.
“Therefore, whether the overall tax revenue will increase or decrease remains unclear in the long term,” he said.
Dr Ngo Tri Long, former director of the Institute for Price and Market Research under the Finance Ministry (MoF), said the principle of taxation should ensure a balance and harmony between the interests of the country and taxpayers.
Long raised concerns that if the total tax burden is too high it may negatively impact workers’ living standards, indirectly stall the economy and encourage tax evasion.
Prolonged and excessive taxation may lead to a decline in production output and a general decline in the national budget.
Hundreds of businesses, mostly from the beverage industry, attended a workshop organised by the Vietnam Chamber of Commerce and Industry and the Vietnam Beer-Alcohol-Beverage Association in Hanoi last week.
Nguyen Duc Le, deputy director of the Market Management Department under the Industry and Trade Ministry said last year there were 102 violations reported across the industry with the fines totalling over 1.4 billion dong. During the first six months of 2024, however, 153 violations were reported with fines totalling over two billion dong.
He said the ongoing rampant smuggling and counterfeiting contributed significantly to the large price difference between illegal and legal products. There were still segments in the market, typically among the lower-income demographic, who still preferred cheaper but questionable-quality products.
He stressed the importance of a coordinated effect by ministries and government agencies in straightening up the market and reducing smuggling and counterfeiting.
The country has imposed a special consumption tax on 11 commodities including cigarettes and cigars, various types of alcohol, beer, vehicles with fewer than 24 seats, petrol and petrol additives, air conditioners up to 90,000 British thermal units (BTU), playing cards, votive papers, motorcycles over 125cc, aeroplanes and yachts.
The law, initially introduced in 2008, had been amended four times previously as the government adapted to regulate consumption, conserve resources, protect the environment and bolster the State budget. — Viet Nam News/ANN
