Beverage businesses “call for help” before proposal to impose 100% special consumption tax

Beverage businesses “call for help” before proposal to impose 100% special consumption tax

Beverage businesses continue to face proposals to impose special consumption tax at the highest rate of 100%, causing many businesses to worry about the uncertain future ahead.

The Ministry of Finance is seeking opinions to increase the special consumption tax on alcoholic beverages (beer, wine) and soft drinks. Accordingly, this agency proposes to increase the special consumption tax on alcohol above 20 degrees to 100% by 2030. Similarly, alcohol below 20 degrees is subject to a tax of 50%, then increased to a maximum of 70%. Beer of all kinds will also increase gradually from 80% to 100%.

Beverage businesses cry for help on the brink

However, in a written response to the proposal of the Ministry of Finance, the Vietnam Beer - Alcohol and Beverage Association (VBA) presented the sad realities in the industry.

Specifically, from 2020 to present, under the great impact of the epidemic, world political conflicts, policies restricting alcoholic beverages... many businesses in the industry have recorded an alarming decline in output, revenue, and profit targets.

For example, Heineken Vietnam, for the first time in decades, saw its consumption market in Vietnam decline by double digits in 2023.

As for Sabeco, a company that owns 26 factories in 20 provinces and cities, from 2021 to now, the company has had negative growth compared to 2019 in both output and revenue; profits range from single to double digits. The processing factories in the system are exhausted because input prices have increased by 20-40%, while selling prices cannot increase.

Habeco reported that in 2023, its consumption output decreased by about 30% compared to 2019, its budget decreased by 10% and it had to cut 25% of its workforce. Habeco has been continuously losing money for many years, so by the end of 2023, it recorded its 27th consecutive quarterly loss, accumulating to 457.7 billion VND.

The inventory index of the entire beverage industry in 2023 is estimated to increase by 120% compared to 2022. The second quarter of 2024 also recorded an increase of nearly 128.9% in the beverage industry's inventory index.

According to VBA, the beverage industry is subject to many restrictions, from at least 4 major laws: Law on Prevention of Alcohol Harm; Law on Special Consumption Tax; Law on Commerce; Law on Advertising, E-commerce, and Environmental Protection. Meanwhile, policies supporting value-added tax reduction are not applied to the alcoholic beverage industry.

“Consumption demand has decreased due to people's income being affected after the pandemic. Restaurants and eateries have recorded a sharp decrease in the number of customers, leading to closures or staff cuts, downsizing... This has affected the entire supply chain, even the tourism and agricultural industries," the VBA document stated.

In addition to regulations related to handling alcohol concentration violations that cause alcohol and beer businesses to reduce production, businesses also have to face competition from floating alcohol and beer of unknown origin. These products not only cause loss of revenue to the State budget, negatively impact human health but also affect the production and business activities of legitimate businesses.

VBA believes that when tax increases make product prices higher, consumers will tend to switch to other cheaper products, consume floating products, poor quality, smuggled goods, counterfeit goods... Increasing taxes will reduce the competitiveness of domestic products.

International experience shows that high tax increases will create a large gap in benefits between legitimate and illegal products, thereby causing smuggled goods to become more popular, posing many potential risks to consumers' health, and generating costs for market management agencies and customs to combat smuggled goods.

"Not to mention, increasing taxes will create disadvantages and barriers between domestically produced and imported goods, when domestic enterprises are facing many difficulties in capital, high production costs, and a narrowing market," the Association further argued.

Proposal to impose special consumption tax of 80% instead of 100%

Responding to the Ministry of Finance, VBA said that the impact assessment section in the Draft Law on Special Consumption Tax (amended) has not mentioned the full and comprehensive impacts such as the position and significant contributions of the beverage industry to society and the economy in general.

With hundreds of manufacturing and trading factories in the industry distributed in almost all provinces and cities across the country (over 51 provinces and cities), enterprises in the beverage industry create millions of direct and indirect jobs in manufacturing facilities, in the supply chain, services from raw material suppliers, packaging, warehousing, distribution, service industries, tourism, restaurants, logistics, etc.

Each year, the industry contributes nearly 60 trillion VND to the state budget. Enterprises in the industry are also among the top budget contributors in the locality, playing an important role in developing the industrial ecosystem.

“Because this is an extremely important legal framework for the beverage industry, the Association hopes that when the Ministry of Finance conducts an impact assessment of the draft Law, it will prioritize assessment studies that are put into a practical context, based on scientific foundations, and have more complete and comprehensive impact assessment reports,” VBA recommended.

The association proposed to postpone and reduce the increase in special consumption tax.

Specifically, VBA proposed to postpone the effective date of the Law on Special Consumption Tax (amended) to 2027, instead of 2026 as planned by the Ministry of Finance.

Source: https://baodautu.vn/doanh-nghiep-do-uong-keu-cuu-truoc-de-xuat-ap-thue-tieu-thu-dac-biet-100-d219178.html