Beverage enterprises need to renovate the process to adapt with rise of tax

A workshop on 'Tax adjustments to promote business operations

The draft amendment to the Special Consumption Tax Law, drafted by the Ministry of Finance, has received significant support and positive feedback from numerous businesses and experts. The objectives of the special consumption tax policy for alcoholic beverages in Vietnam are considered quite similar to the fundamental goals in other countries, with the primary goal being to protect consumer health, regulate consumption, and limit alcohol and beer abuse. At the same time, the policies also emphasize the goal of ensuring a sustainable source of state budget revenue.

A workshop on 'Tax adjustments to promote business operations,' held by Vietnam Investment Review on August 14, 2024, reported that in 2023, the beer, wine, and soft drink industry contributed approximately 60 trillion VND, equivalent to about 3.4% of state budget revenue.

Therefore, when drafting the Law, many opinions expressed concerns about the impact on the operations of businesses in the beer, wine, and soft drink industry. However, Mr. Nguyen Van Phung, former Director of the Large Enterprise Tax Department (General Department of Taxation), said that the latest draft submitted to the Government has taken into account public opinion by not immediately applying the mixed method or the absolute method of tax calculation. Because if applied, it could cause a shock and damage to businesses and consumers, as the majority of consumers have average incomes and do not consume high-priced beverages. Therefore, according to Mr. Phung, calculating taxes using the relative method, calculated as a percentage, is reasonable.

Regarding the level of tax increases, experts believe that this should be based on scientific research and comprehensive economic models. Moreover, businesses have requested that the drafting board closely coordinate with businesses and associations to help ensure the feasibility and effectiveness of the tax policy implementation in the future.

Ms. Le Minh Trang, Deputy Director of the Retail Research Department at NIELSENIQ (NIQ), said that with the impact of the increase in special consumption tax, according to long-term data, the group of products in the economy segment may still maintain its position, contributing about 55-60% of the beverage industry's output. Ms. Trang assessed that this will create growth potential for businesses with products in the corresponding segment.

Explaining the tax policy further from the perspective of the management agency, Mr. Nguyen Van Phung stated that tax policies are implemented to ensure a source of funding for budget expenditures, national defense and security, and social welfare. Therefore, the purpose of increasing the consumption tax is not only to ensure consumer health but also to implement the National Assembly's resolution on restructuring the state budget, as well as to ensure long-term sustainable green and clean development and the health of the people.

However, the expert noted that government agencies and businesses need to have communication campaigns to help consumers accept the price increases, as well as to influence manufacturers to improve technological processes, innovate formulas, and reduce toxic substances. According to Mr. Phung, businesses today are too focused on advertising rather than product improvement and production process improvement.

Sharing more on this issue, Ms. Nguyen Thi Cuc, Chairwoman of the Vietnam Tax Consultancy Association, also emphasized that the special consumption tax is an indirect tax, included in the selling price of beer and wine. Therefore, along with the factor of increasing taxes, it is necessary to implement many solutions to limit the consumption of alcoholic beverages by consumers. The implementation of Government Decree 100/2019/ND-CP, which stipulates administrative sanctions in the field of traffic, has significantly reduced the number of drivers who drink alcohol, which is evidence of this.

Moreover, to protect domestic beverage producers, Ms. Nguyen Thi Cuc suggested that it is necessary to strengthen measures to manage smuggled beer and wine, especially homemade alcohol, illegally produced and sold alcohol that does not meet quality standards and affects public health. In addition, establishments that sell homemade alcohol must also be strictly managed from business registration to the payment of special consumption tax, value-added tax, etc."