Consumption tax likely to hurt beverage industry in Vietnam
HANOI: A draft proposal to increase a special consumption tax on alcoholic beverages may hurt Vietnam beverage industry’s ability to compete on their home turf, putting the entire supply chain at risk, say industry insiders.

Lam Du An, deputy director-general of the Saigon Beer-Alcohol-Beverage Corp, said since 2021, the company’s revenue has decreased by 10%-15% compared with 2019. The company reported a 7% decrease in revenue in 2022 and an 11% decrease in revenue in 2023, with a drop in pre-tax profit of 23%.

“Input costs and raw materials including prices for hops, cans and bottle caps, various auxiliary materials and transportation, among others, have increased significantly.

“Producers are facing input cost increases of 20% to 40% while consumption has been in sharp decline and prices cannot be increased further,” An said.

Dau Anh Tuan, vice-chairman of the Vietnam Chamber of Commerce and Industry and head of the chamber’s legal department said that the industry has been struggling to recover from the Covid-19 pandemic and global geopolitical tension.

Meanwhile, there has been talk among lawmakers that sugary beverages should be the next in line to be subjected to a special consumption tax.

Vice-chairman of the Vietnam Association of Financial Investors Nguyen Hoang Hai said that paying additional taxes will erode Vietnamese beverage makers’ competitive advantages.

Over the long term, it will hurt their ability to invest in new technologies or expand production.

To make matters worse, it may allow foreign players to swoop in to claim additional market share from domestic players.

“It is well-known there is rampant tax evasion in the informal sector of the industry,” Hai said.“Some companies deliberately lowered their sales to keep taxes low. Now adding a tax on low-priced beverage products will encourage more tax evasion.”

Representatives from the industry have long called for greater support from the National Assembly and the government so that any new tax policies will be studied and reviewed carefully to ensure fairness and balance to all players, given the market’s conditions.

Nguyen Duy Hung, vice-chairman of the Vietnam Beer-Alcohol-Beverage Association (VBA) expressed concerns over the potentially severe impacts on the industry’s supply chain and consumers.

He said: “The VBA proposes that the National Assembly and the government consider delaying the amendment of the Special Consumption Tax Law until at least 2025, to create conditions for Vietnamese beverage makers to recover, stabilise and gradually develop.”

Hai said introducing new tax policies without careful study and consideration of the market conditions could lead to a situation in which few companies will benefit while damaging the state budget and consumer interests. — Viet Nam News/ANN
Economy
HANOI: A draft proposal to increase a special consumption tax on alcoholic beverages may hurt Vietnam beverage industry’s ability to compete on their home turf, putting the entire supply chain at risk, say industry insiders.