Vietnam: Vietnam halts mixed tax proposal on beer, alcohol

In a significant shift, the Vietnamese Government has decided against implementing a mixed tax regime on beer and alcohol products, adhering to WTO commitments and the Prime Minister-approved tax system reform strategy. This move, detailed in Resolution No 25/NQ-CP, aligns with the broader aims of the amended Law on Special Consumption Tax, BNN Breaking reported on March 3.

Following concerns from businesses and experts over the proposed tax calculation method changes, the Government's decision has been widely welcomed. The proposed amendments had sparked a debate on the most equitable and effective tax structure for beer and alcohol products, with the absolute tax method previously favored for its simplicity. However, this method's inability to adjust to market fluctuations posed significant challenges, particularly for Vietnamese beer producers who dominate the lower-priced segments of the market.

The resolution to maintain the current tax calculation method means that the beverage industry can avoid the potential upheaval associated with transitioning to a mixed or absolute tax regime. This decision is particularly crucial for local beer producers, who faced the prospect of increased production costs and reduced competitiveness. Moreover, the mixed tax regime would have disproportionately affected low-income consumers by elevating taxes on popular beer varieties, further tilting the scales in favor of premium products.

The Government's resolution sets a clear timeline for the law project's submission and approval, aiming for inclusion in the 2024 Law and Ordinance development program and final approval by May 2025. This careful planning reflects Vietnam's commitment to aligning its tax policies with global standards and practices, ensuring that its tax system supports both domestic industry competitiveness and compliance with international obligations. As Vietnam continues to navigate the complexities of tax reform, this decision marks a critical step in balancing economic growth with social equity.

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