Finance ministry proposes gradual hike in excise tax on liquors to 100%

By Phuong Dung   June 13, 2024 | 08:21 pm PT
Finance ministry proposes gradual hike in excise tax on liquors to 100%
Customers hold glasses of beer at a restaurant in Hanoi, Vietnam, June 24, 2017. Photo by Reuters/Kham
The Ministry of Finance has recommended that the government should gradually raise the excise tax on liquor to 100% by 2030.

The rates are currently 65% for beer and 35-65% for other liquors, depending on the alcohol content, and apply to all types of liquors, fermented drinks made from fruits and grains and beverages containing alcohol, including soft drinks.

The tax hike aims to boost liquor selling prices, as recommended by the World Health Organization.

The ministry recommended raising the tax rate to 80% in 2026 and gradually to 100% by 2030 for liquors with alcohol content of more than 20% and all beers.

For beverages with lower alcohol content, it wanted 50% and 70% rates.

Alcohol is addictive and causes significant health problems to consumers and negatively impacts public order and traffic safety, it said.

"Applying high tax rates is necessary to raise awareness about the harm caused by excessive alcohol consumption."

It said the higher tax would help reduce consumption.

Liquor businesses have petitioned the government not to increase the tax, saying it would damage the industry and hit tax collections.

Last year the industry's revenues fell by 11% and profits by 23%, according to the Vietnam Beer - Alcohol - Beverage Association.

The businesses said hiking taxes to increase prices is not an effective tool to change consumer behavior, and instead suggested having policies to encourage the industry to innovate and create suitable products that benefit consumers and the economy.

The government foresees the liquor industry producing 4.6 billion liters of beer and 350 million liters of other beverages, and exporting US$600 million worth of these products.

The ministry’s proposal to the government also included new or higher excise taxes on several other products, including tobacco products such as cigarettes, leaves, cigars, pipe tobacco, and other products in 2026-30.

The hikes will take effect gradually at the rate of VND5,000-10,000(US$0.2-0.4) on a pack of cigarette and VND50,000-100,000 for a cigar and 100 grams or milliliters of other tobacco products.

This would help reduce men’s smoking rate from 42.7% in 2022 to 38.6% by 2030, the ministry estimated.

Taxes collected on tobacco industry would increase by 2.2 times from 2022 to VND39.2 trillion in 2030, it added.

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