Beer, spirit SCT hike triggers concern

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In the amended Special Consumption Tax (SCT) Law, the tax levied on beer would increase from the current 50 per cent to 55 per cent starting from July 2015, and then rise further to 60 per cent from 2017 and 65 per cent from 2018.

Similarly, the rate applied to alcohol with a proof content from 20 degrees will increase from 50 per cent to 65 per cent and for alcohol below 20 degrees from 25 to 35 per cent.

Director of the Ministry of Industry and Trade’s Industrial Policy and Strategy Institute (IPSI) Duong Dinh Giam said the beer sector has been largely affected by a number of legal documents and policies, such as the Investment Law, the Law on Enterprises, and particularly the SCT Law.

Giam argued that the tax increase on beer from 45 to 50 per cent in January 2013 had a significant impact on beer production and consumption.

Accordingly, beer consumption and production sank 8.2 per cent and 7.5 per cent on-year, respectively, in the first quarter of 2014. Meanwhile, while the beer sector provides jobs to 3 per cent of the workforce, it has created 7 per cent added value in the food processing industry thanks to higher productivity compared to other sectors.

The beer sector’s net revenue reportedly makes up nearly 60 per cent of the beverage sector’s net revenue.

A report on the role of the beer sector in Vietnam’s socio-economic development, conducted by IPSI in co-operation with policy research firm Regioplan (RP) and audit and advisory firm Ernst&Young (EY), showed that in 2013 the beer sector generated VND30 trillion ($1.4 billion) in added value and paid VND21 trillion ($1 billion) to the state coffers, accounting for 4.5 per cent of total budget collections from production and business.

The report also stated that the higher tax on beer products from the outset of 2013 had hurt the labour situation and budget collections when comparing figures from the first quarter of 2013 against the first quarter of 2014.

Tran Thuan An, head of Market Department at the Hanoi Beer, Alcohol and Beverage Joint Stock Corporation (Habeco) said the company would find it hard its financial goals if the SCT on beer goes up.

Stephane Gripon, CEO of Diageo Vietnam Limited, which distributes spirits in Vietnam such as Johnnie Walker and Smirnoff, suggested that any change to the investment environment and business operations should be carried out equally and consistently.

“If the government is of the view that they need to increase the SCT, implementation should be no earlier than January 1, 2016, and phase over the next three to four years, rather than a one-off change,” he stressed.

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