Mixed tax regime not yet applied on beer and alcohol products

The Government has aligned on not adding new content regarding the calculation of mixed taxes for beer and alcohol products to the proposal. (Photo: anninhthudo.vn)

Hanoi - The Government has decided not to apply the mixed tax regime on beer and alcohol products.

This was stated in the newly-promulgated Resolution No 25/NQ-CP on the building of the amended Law on Special Consumption Tax.

According to the resolution, the Government basically agreed with the content of receiving, explaining, and revising the dossier proposing to develop the amended Law on Special Consumption Tax in Report No 25/TTr-BTC which was submitted by the Ministry of Finance (MoF) on February 6, 2024.

It does not add new content regarding the calculation of mixed taxes for beer and alcohol products to the proposal.

This decision is made in accordance with the Prime Minister-approved tax system reform strategy by 2030 and the country's commitments upon joining the World Trade Organisation (WTO).

Regarding the progress of submitting the law project, the resolution clearly stated that the Government has proposed to the National Assembly Standing Committee to include the law project in the 2024 Law and Ordinance development programme during the 7th session in May 2024.

Comments will be sought from the National Assembly on the law project during the 8th session in October and approve it during the 9th session in May 2025.

At the same time, the Government has tasked the Ministry of Finance with finalising the law-making proposal documents and submitting them to the Ministry of Justice for the necessary procedures to add this law project to the 2025 Law and Ordinance development programme. Additionally, adjustments will be made to the 2024 and 2025 Law and Ordinance development programmes.

Previously, there was a concern among businesses and experts regarding a regulation in the proposed amendment to the Law on Special Consumption Tax. The concern revolved around whether to include an absolute tax calculation method and a mixed tax calculation method or not.

Experts point out that relative, absolute and mixed tax calculations each have their own advantages and disadvantages. Specifically, the absolute tax calculation method is favoured for its simplicity and ease of implementation.

Many countries have utilised this method to restrict the production and consumption of items that are detrimental to health. However, a major shortcoming is that it fails to adjust adequately to price fluctuations during periods of inflation or deflation.

On the other hand, we have not currently applied the mixed or absolute tax calculation method for alcohol and beer products, so the advantages of this method are still in the research process, but in practice it has not been proven.

If an absolute tax rate is applied on the number of litres of product, the price of high-end lines will be more profitable, while the price of popular lines which Vietnamese enterprises account for the majority will be pushed up, thereby affecting production and the competitiveness of Vietnamese beer producers.

As for the mixed tax regime, the special consumption tax on premium beer products will increase from 65 to 75 per cent. Meanwhile, popular beer will be increased from current 65 to 85 per cent. Therefore, low-income consumers are subject to higher taxes than high-income consumers.

Fork in road for special consumption tax on alcohol Industry insiders are worried that changes to taxes on beer will damage the domestic industry in favour of higher priced foreign brands.