Customers purchase canned beer at a supermarket. The consumption of beer in Viet Nam in the first quarter of this year decreased by 7.5 per cent compared with the same period last year. — Photo news.zing.vn

HA NOI (Biz Hub) — The consumption of beer in Viet Nam in Q1 this year fell by 7.5 per cent compared with last year following a 5-per cent increase in the product's special consumption tax.

The decline was noted in a report by the Industrial Policy and Strategy Institute (IPSI) on the importance of the beer industry to Viet Nam's socio-economic development. Released earlier this week, the report also found that although the country's gross domestic product (GDP) in the first quarter of this year grew by 4.96 per cent – the highest rate in the last three years — direct and indirect contributions from the beer industry posted declines, chinhphu.vn website report

Specifically, the production output fell by 8.2 per cent, consumption fell by 7.5 per cent and labour force fell by 10 per cent.

According to Director of the Ministry of Finance's Department of Tax Policies Pham Dinh Thi, tax policies, especially special consumption tax, has a significant impact on the beer industry.

Under the draft amended law on special consumption, the tax rate on beer was proposed to be raised from the current 50 per cent to 55 per cent on July 1, 2015; 60 per cent on January 1, 2017; and 65 per cent in 2018. This move was aimed at limiting beer consumption while increasing tax revenues.

The tax hikes were forecast to have an impact on the beer industry from the beginning of this year, including declines in production output, consumption, revenues and profits.

As the beer industry has played an important role in socio-economic development in the country, adding nearly VND21 trillion (US$990.6 million) to the State revenue last year, the report proposed that the tax increases should be rolled out gradually over three to five years to ensure enterprises and consumers adapt to the policy changes. — VNS