Beverage businesses baulk at tax rise plans
Relevant enterprises have varying ideas as to how excise tax should be utilised, Photo: Shutterstock

The Ministry of Finance’s (MoF) fresh draft report on the proposal to develop a special consumption tax (SCT) said the rate could be upped by 10 per cent, with the aim to protecting people’s health.

Dr. Nguyen Dinh Cung, former director of the Central Institute for Economic Management, said that today is the most difficult time for Vietnamese businesses in decades. “The beverage industry was strongly affected by the COVID-19 pandemic, while external influence has been reduced due to the decrease in demand and rise in inflation,” Cung said, adding that the industry is also still trying to get to grips with a 2019 decree that set huge fines for drink-driving.

Cung said that in such a context, the government aims is to promote, support, and encourage an increase in demand as well as effective use of revenues.

Meanwhile, Dau Anh Tuan, vice secretary-general of the Vietnam Chamber of Commerce and Industry, said that many restaurants have complained that their revenues are seeing a 50-60 per cent reduction on-year. “The plan to raise the SCT is not suitable at this time as businesses are suffering from many difficulties,” said Tuan.

According to the General Statistics Office, the country’s six-month economic growth is 3.72 per cent on-year, far lower than the 6.42 per cent rise in the first half of the previous year. The industrial sector only witnessed a 0.44 per cent increase over the same period last year, which is the lowest increase for over a decade. A 15 per cent drop in beer production was reported for the first half of 2023.

In an attempt to ease the pressure on businesses, in April the government released Decree No.12/2023/ND-CP on extension of VAT, corporate income tax, personal income tax, and land rental fees applicable for the 2023 tax year.

Thus, industry insiders are concerned that if the SCT takes effect anytime soon, it will go against the government’s recent efforts. “Increasing tax revenues does not raising budget revenues. Vietnam should consider when to change tax rates and tax calculation methods carefully,” said Vo Tri Thanh, director of the Institute for Brand and Competitiveness.

Thanh explained that traditionally, there are three main methods used: relative tax, absolute tax, and hybrid tax. However, there have not been many in-depth studies on the suitability of rates and methods of excise tax on alcohol in Vietnam.

Nguyen Van Phung, former director of Tax Administration of Large Enterprises under the MoF’s General Department of Taxation, said that if the tax calculation method is changed without a thorough impact assessment, it will affect the production and business ability of Vietnamese enterprises, and will indirectly greatly affect state budget revenues as well as the budget balance of localities.

“The choice of tax calculation method is the choice of each country and territory so that it is suitable for their socioeconomic conditions. Therefore, in the current situation of Vietnam, this is not the right time to apply a mixed method or the absolute method, even in terms of state budget revenue and costs,” Phung said.

According to the Vietnam Beer-Alcohol-Beverage Association, the beer industry has made a significant budget contribution. Beer and alcohol businesses contribute about $2.6 billion per year to the budget, meeting domestic consumption needs and creating thousands of jobs.

Source: VIR