Not Suitable for Vietnam
According to the Ministry of Finance, for the beer product, only one enterprise producing and trading beer has proposed researching and considering the application of special consumption tax using the mixed method, which is Heineken Vietnam Brewery Joint Stock Company.
However, many opinions (State Capital Investment Corporation, Association of Foreign Invested Enterprises, Association of Vietnamese Financial Investors, Saigon Beer - Alcohol - Beverage Corporation (Sabeco), Hanoi Beer - Alcohol - Beverage Corporation (Habeco), and more than 20 beer and wine enterprises) have proposed not applying the mixed tax method but instead continuing to apply the tax method based on the percentage of the selling price of the manufacturer and importer as it is now.
It is known that the reason is that the domestic beer market has a 80% market share of popular and low-priced local beer, and there is a large price difference between high-end, near-high-end, and popular products.
The Ministry of Finance believes that, in the current context of Vietnam, the selling price of popular wine and beer is much lower than that of high-end products. Therefore, applying a mixed special consumption tax or an absolute tax (taxing a fixed amount per unit of product) will put a lot of pressure on low-priced products.
The reason is that applying an additional absolute tax (products with different selling prices will be subject to the same amount of tax) will lead to a significant increase in the selling price of popular products compared to high-end products. Therefore, high-end products with high prices can replace and dominate the market, causing pressure on popular and low-priced beer and wine, affecting production, competitiveness, and labor employment.
"Therefore, the mixed tax method or the absolute tax method for wine and beer products is not suitable in the current conditions of Vietnam" - the Ministry of Finance stated.
Taxing according to the traditional method will be more practical
Earlier, one of the regulations that caused concern among businesses and experts in the proposal to build the draft of the Special Consumption Tax Law (amended) this time was whether to add the absolute tax method and the mixed tax method or not.
According to Dr. Nguyen Van Phung - former Director of the Large Enterprise Management Department (General Department of Taxation, Ministry of Finance), taxing relatively, absolutely, or mixed is a method that has both advantages and disadvantages.
Therefore, Dr. Phung believes that the state management agency will conduct thorough research on the necessary and sufficient conditions, clearly analyze and evaluate the benefits and costs... on that basis to propose the most suitable tax method in each development stage.
According to Dr. Phung, the Vietnamese beer market has a large difference in price between popular and high-end products. If an absolute tax is applied on the number of liters of product, the price of high-end products will be more favorable, while the price of popular products (dominated by Vietnamese enterprises) will be pushed up. Therefore, it will affect production and competitiveness of enterprises producing Vietnamese beer brands.
According to Dr. Phung's calculation, with the mixed method, the special consumption tax of high-end beer products will increase from 65% to 75%. Meanwhile, the current 65% tax rate for popular beer will increase to 85%. Therefore, low-income consumers will pay more tax than high-income consumers.
Dr. Nguyen Van Phung believes that, in the current context, applying the traditional tax method (relatively) based on the percentage of the selling price will be more reasonable, effective, and practical for both producers and consumers.
"On that basis, I believe that in the current conditions, applying the mixed tax method is not suitable. If the tax method is changed and causes disruption, resulting in reduced income for Vietnamese brands and increased income for foreign brands, it should be carefully considered" - Dr. Phung stated.
