Excise tax policy on alcoholic products changed 12 times

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Data on the proportion of excise tax of total state budget revenue in recent years shows that the proportion of excise tax of total budget revenue has increased over time.

According to Mrs. Nguyen Thi Cuc, Chairwoman of Vietnam Tax Consultants' Association., in 2018, excise tax revenue accounted for 9.95% (equivalent to VND124,181 trillion VND/VND995,139 trillion), in 2019, it accounted 10.7%, in 2020 it accounted for 11.50%, in 2021 it decreased to 9.94%, but in 2022 it increased to 12.4% of total budget revenue (equivalent to VND130,236 trillion/ VND1,053,960 trillion).

Data on excise tax revenue from beer and wine in the total revenue from excise tax also shows that excise tax revenue from beer accounts for a large amount. For example, in 2018, the excise tax on beer was VND38.46 trillion, alcohol was VND2.23 trillion out of the total excise tax revenue of VND124.181 trillion. In 2022, they were VND 55.306 trillion and VND1.12 trillion respectively out of a total of VND130.236 trillion.

Since the excise tax law was introduced in 1990, the excise tax policy on alcoholic products has been changed 12 times.

Sharing about changes in excise tax policy on alcohol through each historical period in Vietnam, Ms. Nguyen Thi Cuc said, in the first excise tax law (1990), excise tax rate for wine above 40 degree is 65%, wine from 30-40 degrees is 60% and wine below 30 degrees is 55%. All types of fresh beers, bottled or canned beers... have a general tax rate of 50%.

Notably, in the Excise Tax Law No. 21-L/CTN in 1993, wine above 40 degree had a tax rate of up to 90%, wine from 30-40 degrees i 75%, wine below 30 degrees and fruit alcohol 25 and medicinal wine 15%. Meanwhile, all types of beer are subject to a general tax rate of 90%, canned beer was 75%. These tax rates were maintained in the Excise Tax Law No. 43L/CTN 1995.

In the 1998 Excise Tax Law, the 2003 Excise Tax Law, and the 2005 Excise Tax Law, the tax rate for alcoholic beverages decreased. According to the Excise Tax Law in 2008 and the Excise Tax Law in 2016, wine 20 degrees or more had the same tax rate as beer and applied according to the roadmap.

For example, in the 2016 Excise Tax Law, alcohol 20 degrees or more had a tax rate of 55%; in 2017 60%; from 2018 to present 65%. For alcohol below 20 degrees, from 2016 to 2017 the tax rate was 30%; From 2018 to present, it is 35%. For beer, the tax rate in 2016 was 55%; in 2017 60% and from 2018 until now 65%.

Since the first Excise Tax Law in 1990 until now, after 34 years of implementation, the excise tax on alcoholic products has had the most changes in terms of alcohol concentration criteria and types of alcoholic products (fruits), medicinal wine about the product types of fresh beer, canned beer or bottled beer.

Expert Nguyen Thi Cuc recommends that it is necessary to harmonize international practices and specific conditions of Vietnam to research and perfect the tax policy system, tax management and institutional reform.

Sharing international experience on excise tax, Ms. Dinh Thi Quynh Van, General Director of PwC Vietnam Company, said that excise tax structures in the world include three types: tax structure based on percentage (tax determined as a percentage of the taxable price); absolute tax structure (fixed tax rate per unit of goods); mixed tax structure (combination of percentage tax and absolute tax).

According to the WHO, the absolute tax system (absolute by volume and absolute by alcohol concentration) is the most effective system, because the absolute tax system represents the correlation between the alcohol level in the product and the tax payable. The absolute tax system is the most commonly used, as shown by the fact that the absolute tax on alcoholic beverages has long been considered a good policy reform to create conditions for economic communities to operate better. In addition, the EU requires member states to comply and ensure that the domestic law system will tax alcoholic beverages according to the absolute tax system.

Speaking about the trend of shifting the excise tax structure in some Southeast Asian countries, Ms. Van said, Thailand applies absolute taxes on all alcoholic beverage products on the market (previously they still applied tax as a percentage for some products). Similarly, the Philippines, Thailand has reformed its tax system to eliminate the impact of product prices on the amount of tax payable. In 2024, Thailand will reduce the excise on alcohol products to promote tourism and the strong wine market (the excise tax on alcohol products decrease from 10% to 5% and on strong wine from 10% to 0%).

For Vietnam, Ms. Dinh Thi Quynh Van said that immediate shifting from percentage to absolute tax will be complicated and disruptive, so we should gradually move from percentage tax to combined tax before moving to the absolute tax system.

According to Nguyen Minh Thao, Head of the Business Environment and Competitiveness Research Department, at the Central Institute for Economic Management (CIEM), the process of developing and adjusting tax policies, including excise tax on alcoholic beverages, needs to ensure that policy makers must research and assess comprehensive socio-economic impacts; rely on scientific and practical bases; consult widely, especially those affected by the policies; and create the consensus on the policies.

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Along with that, it is necessary to combine with other measures and policies related to alcoholic beverages (for example, the Law on Prevention and Control of Harmful Effects of Alcohol Beverages, Decree No. 100/2019/ND-CP on regulations on sanctioning administrative violations in the field of road and rail traffic;). At the same time, it is necessary to provide information about the abuse of alcoholic beverages as well as to supervise and check the enforcement process.