Tax burdens to raise beer prices

When the special consumption tax (SCT) on beer increases to 65 per cent, it is estimated that consumers will have to bear a tax levy of 45.9 per cent, not to mention the possible growth of value added tax (VAT) on beer proposed by the Ministry of Finance (MoF).

Each bottle of beer will be imposed a 65 per cent SCT from 2018. Photo: Duc Thanh

At present, the SCT on beer remains at 60 per cent, but from January 1, 2018, it will rise to 65 per cent. In addition, recently, MoF has proposed to increase the VAT on beer to 12 per cent from the current 10 per cent.

According to newswire Dan Tri, Nguyen Van Viet, chairman of the Vietnam Beer Alcohol Beverage Association (VBA), said that the real tax imposed on beer is much higher than the figure cited by Euromonitor.

In particular, every bottle of beer is imposed a VAT of 10 per cent and SCT of 60 per cent, thus, consumers have to bear 43.5 per cent of tax. At the beginning of 2018, when the new SCT is applied, consumers will have to shoulder 45.9 per cent for each bottle of beer, not to mention a possible VAT of 12 per cent.

It is forecasted that beer prices will increase, “But the specific increase also depends on the market, the competition, and the strategy of each brewer,” Viet said.

Mikio Masawaki, general director of Sapporo Vietnam, agreed with Viet and added that when the SCT increases to 65 per cent in 2018, the company will have to set new prices. Sapporo Vietnam will consider the market situation carefully to find an appropriate price.

Although brewers in Vietnam have not published the specific prices after the SCT rise, experts said that the extra tax will increase production costs, resulting in an approximate increase of 7 per cent in beer prices. Thus, there have been concerns that the rising price will affect demand, which brewers might countermand by increasing prices gradually to avoid a sharp cut in revenue.

Not only SCT and VAT

Not only the rising SCT and the possible growth of VAT, brewers in Vietnam are confronted with a possible additional 1-2 per cent raise in product price if the draft law on preventing and fighting against the harms of wine and beer consumption is passed and enacted. The additional charge will go to a fund to enhance community health initiatives.

Masawaki said that if this draft is passed and the law is enacted, the new levy will put a new burden on brewers.

On one side, Viet worried that this law may contribute to the rise of beer smugglers or counterfeit beers in the market. This will heavily damage brewers who strictly follow the law and pay tax, and will also affect the national budget.

On the other side, many experts agreed on increasing taxes on beer as well as other alcoholic beverages, as it can reduce consumption demand, which is necessary to reduce adverse health effects. The excessive consumption of alcoholic beverages is also the root of many social problems, such as violence, insecurity, and traffic accidents.

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By Trang Vu