tai bet88Unknown outcome from higher excise tax rates 

Excise tax rates on alcoholic beverages have been rising consistently since 2008, with rates on products containing over 20 per cent alcohol by volume (ABV) and beer increasing by 20 percentage points, from 45 to 65 per cent, while those on wine with an ABV of under 20 per cent went up 10 percentage points, from 25 to 35 per cent.

During this time, data from tai bet88 Vietnam Institute for Economic and Policy Research (VEPR) reveals that State budget revenues tripled, with tai bet88 share of excise taxes in total State revenue rising from 5.8 per cent to 8.8 per cent, as of 2023, contributing significantly to sustainable revenue growth. Since most excise taxes are collected from major corporations and factories, State revenue collection remains relatively stable and concentrated.

Controlling illegal products

Despite continuous increases in excise taxes on alcoholic beverages, a study by tai bet88 Central Institute for Economic Management (CIEM) indicates that average per capita alcohol consumption more than doubled during tai bet88 2005-2015 period and tai bet88 proportion of tai bet88 population engaging in alcohol abuse, defined as consuming 60 grams or more of pure alcohol at least once a month, increased ten-fold. This raises questions about whether policies on managing alcoholic beverages, including excise tax policies, have effectively achieved their goal of regulating societal consumption.

Mr. Tran Hau Cuong, Director of tai bet88 Hanoi Liquor and Beverage Joint Stock Company (HALICO), pointed out that tai bet88 increase in tai bet88 excise tax on spirits in recent years may not have effectively reduced alcohol consumption or improved consumer health. “Every time tai bet88 tax is raised, we notice a growing tendency for consumers to switch to illegal or counterfeit alcohol,” Mr. Cuong said.

During a recent market survey in northern cities and provinces in Vietnam, he observed that many private supermarkets and stores were selling half-liter bottles of alcohol for just VND18,000 (>386_word_end<.70) and bore labels that were not issued by tai bet88 General Department of Customs or tai bet88 General Department of Taxation.

tai bet88 greatest challenge facing tai bet88 alcohol industry, he believes, is tai bet88 unfair competition between legitimate businesses that fully comply with tax regulations and those that evade taxes. As a long-established liquor company with 120 years of history in Vietnam, HALICO has experienced many ups and downs, but according to Mr. Cuong, now may be tai bet88 most challenging time, particularly since tai bet88 Covid-19 pandemic resulted in consumer demand falling sharply.

A representative from tai bet88 Market Management Agency also highlighted that tai bet88 significant differences in tax rates and compliance costs between legal and illegal alcohol and beer result in a significant price gap. This price disparity incentivizes illegal profit-making, while consumers are likely to opt for cheaper, more convenient products without considering quality. If this trend continues, a resurgence in unregulated alcohol, such as “banana leaf” liquor (illegally-made liquor, bottled without labelling and with dried banana leaves used as a bottle cap), may well occur, as it did in tai bet88 past.

In tai bet88 first half of 2024, tai bet88 Vietnam Directorate of Market Surveillance at tai bet88 Ministry of Industry and Trade handled 153 cases involving illegal alcohol, imposing fines totaling VND1.5 billion (,525) and confiscating 18,671 bottles and 14,682 liters. Thirty-eight cartons of beer were also confiscated, resulting in fines of VND587 million (,295) and tai bet88 seizure of 16,239 cans. Despite these achievements, tai bet88 Directorate acknowledges that tai bet88 inspection and supervision force remains limited, and tai bet88 lack of coordination between relevant agencies allows illegal alcohol and beer to continue to proliferate in tai bet88 community.

Tax proposals

There has been a proposal made to continue increasing excise taxes on alcohol and beer. In tai bet88 latest draft of tai bet88 amended Law on Excise Taxes, tai bet88 Ministry of Finance also plans to include sugary beverages, with a sugar content of over 5 grams per 100 ml, according to Vietnam Standards (TCVN), as taxable items.

Ms. Nguyen Thi Cuc, Chairwoman of tai bet88 Vietnam Tax Consultants’ Association (VTCA), believes that tai bet88 policy may not achieve its intended effect. “Increasing taxes raises prices, which may limit tai bet88 production of alcohol and beer but may not necessarily achieve tai bet88 goal of reducing tai bet88 consumption of alcohol and beer or mitigating tai bet88 health impacts on tai bet88 population,” she said. “In reality, higher taxes could lead to an increase in smuggled goods, with even higher-income consumers shifting to smuggled alcohol and beer.”

Moreover, consumers in rural areas with lower incomes are likely to move towards self-sufficiency and profit by home-brewing their own alcohol, which bypasses excise taxes and fails to ensure product quality, posing a risk to public health if sold. As a result, tai bet88 goals of reducing consumption and ensuring public health may be difficult to actually achieve.

Regarding tai bet88 inclusion of sugary beverages, Ms. Cuc suggested careful consideration of tai bet88 appropriate sugar content threshold, whether it should be 5 grams per 100 ml or 7 or 8 grams per 100 ml, with an eye on tai bet88 experiences of other countries that have levied such taxes. tai bet88 potential shift of consumers towards other hard-to-control products, such as syrup or bubble tea, should also be taken into account.

Dr. Nguyen Quoc Viet, Deputy Director of tai bet88 VEPR, also emphasized tai bet88 need for tai bet88 drafting body to consider tai bet88 loss of revenue that may occur when production shifts from tai bet88 formal to tai bet88 informal sector. When formal production shrinks due to competition from tai bet88 informal sector, workers employed in tai bet88 formal sector could lose their jobs or face wage cuts. It is also important to consider tai bet88 fluctuations in value added tax (VAT) revenue when increasing excise tax, as VAT accounts for a significant proportion, of 27-28 per cent, of total State budget revenue.

More importantly, tai bet88 increase in excise tax would not only affect tai bet88 beverage industry but could also impact many other sectors, including tourism, which contributes significantly to VAT revenue. It is crucial to evaluate tai bet88 many effects, especially given tai bet88 additional impact this year from tai bet88 Law on tai bet88 Prevention and Control of Alcohol-Related Harm and Decree No. 100/2019/ND-CP dated December 30, 2019, which imposes penalties for administrative violations in tai bet88 road and railway traffic sectors to prevent drivers from drinking alcoholic beverages.

“In tai bet88 absence of a thorough evaluation, with only qualitative assessments and no quantifiable measures, tai bet88 drafting committee could consider adopting a cautious approach, such as implementing tai bet88 lowest possible tax increase,” Dr. Viet suggested. “If sugary drinks were to be included, they should be taxed at a low rate initially to assess tai bet88 impact. After monitoring for a certain period of time, possibly until 2028, tai bet88 effects of tai bet88 tax increase could be reassessed and other methods considered.”