Nguyễn Văn Việt, Chairman of the Vietnam Beer, Alcohol, and Beverage Association (VBA), speaks at the meeting — VNS Photo Tiến Đạt

HÀ NỘI — The Vietnam Chamber of Commerce and Industry (VCCI) held a consultation workshop on March 18 in Hà Nội to discuss and refine the draft Special Consumption Tax (SCT) law, warning that sudden increases could be counterproductive.

The event gathered policymakers, industry associations, directly affected businesses, the business community and economic experts.

Speaking at the workshop, the Chief Economist at the Bank for Investment and Development of Vietnam (BIDV) and Director of the BIDV Training and Research Institute, Cấn Văn Lực, noted that amid geopolitical tensions, trade and technology competition, and modest global growth forecasts for 2025-2026, businesses continue to face significant challenges.

"A rapid and substantial tax increase could reduce the overall economic benefits for industries and the economy, leading to decreased consumer and investment demand," Lực said.

He warned that a sharp and sudden increase in SCT on alcoholic beverages could negatively impact long-term State budget contributions, creating multiple difficulties for businesses and workers in the industry, as well as related sectors such as packaging, transportation, tourism, and food services.

Lực proposed that the draft SCT law should balance interests, responsibilities and feasibility for the State, businesses, consumers and farmers involved in raw material production, while ensuring job security for workers.

"To achieve high, sustainable growth while meeting tax policy objectives, a coordinated, consistent, and well-planned approach is essential. Therefore, tax increases should be based on comprehensive impact assessments, grounded in science and practical realities," Lực emphasised.

"Rather than maximising short-term revenue collection, tax policy should focus on fostering stable, long-term sources of revenue. Overly rapid and excessive tax hikes could have the opposite effect, leading to tax evasion, the rise of substitute products with potentially greater harm, and unintended negative consequences."

Nguyễn Văn Việt, Chairman of the Vietnam Beer, Alcohol, and Beverage Association (VBA), highlighted that while Việt Nam’s total retail sales and consumer service revenue grew by 9 per cent in 2024 to VNĐ6.4 quadrillion (US$253.8 billion), the beverage industry experienced a downturn due to weak demand and tightened consumer spending, particularly during the Lunar New Year period.

Việt pointed out that the draft SCT law proposes two scenarios for tax hikes on alcohol, with a stronger inclination toward Scenario 2. This would increase tax rates from 65 per cent to 80 per cent in 2026, followed by annual five per cent increments until 2030, reaching 100 per cent.

For sugar-sweetened beverages, the draft law proposes adding beverages with more than 5g of sugar per 100ml to the SCT category, with a proposed tax rate of 10 per cent.

Việt stressed the need for careful tax policy design that supports businesses rather than stifles economic growth, as the beverage industry plays a key role in domestic consumption, tourism, and employment across the supply chain.

He proposed delaying the SCT increase on beer and spirits until 2028 and adopting Scenario 1, which gradually raises taxes from 2026 onwards, with annual five per cent increments, reaching 90 per cent by 2030.

General Director of Saigon Beer Trading One Member Limited Liability Company (SATRACO), speaking on behalf of Saigon Beer - Alcohol - Beverage Corporation (SABECO), Nguyễn Hoàng Giang, warned: "The entire beer industry, including SABECO, is facing multiple challenges, from the COVID-19 pandemic to Decree 100/168 and declining tourism and dining activities. These difficulties are expected to persist in the coming years."

SABECO urged policymakers to postpone the implementation of the SCT hike to 2028 instead of 2026 and to adopt Scenario 1, which gradually increases taxes over five years, with annual five per cent increments.

Meanwhile, Vũ Lan Hương, a representative of the Vietnam Tobacco Association, supported higher SCT on tobacco to reduce consumption and protect public health. However, she emphasised the need for a gradual tax increase to avoid market disruptions and excessive shocks to businesses.

Director of the Institute for Brand and Competitive Strategy Research, Võ Trí Thành, argued that higher SCT rates on alcohol and tobacco do not necessarily change consumer behaviour, as consumers may switch to illicit products instead.

Similarly, a member of the National Advisory Council for Financial and Monetary Policy, Cấn Văn Lực, pointed out that an across-the-board SCT increase on alcoholic beverages may not effectively target consumer behaviour. He suggested that tax rates should be structured based on alcohol content and sugar levels, rather than applying a flat rate across all products.

Lực recommended delaying the tax hike until January 1, 2028, and adopting Scenario 1, which would allow businesses time to prepare and modernise production technologies.

With ongoing debates among stakeholders, the finalisation of the SCT law would require careful consideration to balance economic growth, tax revenue, public health goals, and industry sustainability, attendees were told. — VNS