Though both policymakers and industry insiders agree that increasing SCT is needed, they acknowledge that the issue is not merely a health-related issue, it is a matter of benefit balance among stakeholders – the State, beer makers and the public.

Võ Trí Thành*
The Government will submit the draft Law on Special Consumption Tax (amended) to the National Assembly for consideration and approval during the ongoing 9th session of the 15th National Assembly.
The over-aching objective of amending the Special Consumption Tax Law is to guide production, regulate consumer behaviour, and restrict the production and consumption of products that are harmful to health and the environment.
However, the proposed amendments are expected to significantly impact the production chains of various industries, including the alcohol industry, potentially hindering the recovery of a sector that makes a substantial contribution to the country's GDP.
According to the Ministry of Finance’s proposal in the draft revised Law on Special Consumption Tax (SCT), two options are being considered for tax increases.
Option one proposes a gradual annual increase of 5 per cent. For alcohol under 20 degrees, the current tax rate of 35 per cent would rise to 40 per cent, 45 per cent, 50 per cent, 55 per cent, and 60 per cent from 2026 to 2030. For alcohol with 20 degrees or more, the current rate of 65 per cent would increase annually to 70 per cent, 75 per cent, 80 per cent, 85 per cent, and 90 per cent. The same schedule applies to beer, also currently taxed at 65 per cent.
Option two suggests a 15 per cent increase in the first year, followed by 5 per cent annual increases. Under this option, alcohol under 20 degrees would be taxed at 50 per cent in 2026, increasing to 55 per cent, 60 per cent, 65 per cent, and 70 per cent by 2030. Alcohol of 20 degrees or more would rise from 80 per cent in 2026 to 100 per cent by 2030. Beer would follow the same trajectory, increasing from 65 per cent to 100 per cent over the same period.
Though both policymakers and industry insiders agree that an increase in SCT is needed (in fact the Government has been following that trajectory), they acknowledge that the issue is not merely a health-related issue, it is a matter of balancing among stakeholders – the State, beer makers and the public.

Over recent years, the beverage industry has faced significant challenges and losses due to the COVID-19 pandemic, global economic fluctuations and restrictive policies such as the Law on Prevention and Control of the Harmful Effects of Alcohol and Decree 100/2019/ND-CP (now replaced by Decree 168/2024/ND-CP) on penalising alcohol-related traffic violations.
These difficulties have led to a sharp decline in output and revenue for many businesses in the sector, with some forced to restructure, scale back production, reduce their workforce, or even shut down operations.
According to calculations by the Vietnam Beer-Alcohol-Beverage Association (VBA), based on data from the General Statistics Office, the beer industry experienced an average annual growth rate of 9.76 per cent during the 2009-13 period – nearly reaching double digits. However, from 2016 to 2019, when the special consumption tax increased by 5 per cent annually, the industry’s average growth rate declined to 6.85 per cent. If the period is extended to 2024, the average growth rate further drops to just 3.3 per cent, illustrating a clear downward trend correlated with rising tax pressure.
If the State implements a steep increase in the special consumption tax starting in 2026, the impact will be far-reaching. The beverage industry is not merely a standalone manufacturing sector – it is interconnected with a broad supply chain involving other industries, such as agriculture, transportation, services, tourism and especially food and beverage distribution. A sudden and significant tax hike could trigger a chain reaction, disrupting multiple sectors and threatening the livelihoods of millions of workers.
In addition, when taxes rise, product prices will inevitably increase to offset the higher tax burden. Though many studies show that beer demand is generally considered price inelastic, meaning consumers are not very sensitive to price changes, income plays a role in the demand for beer, with lower-income individuals potentially being more sensitive to price changes. Therefore, despite expectation that higher taxes can lead to reduced consumption, the impact across different market segments has not been fully considered.
In Việt Nam, a significant portion of the population belongs to low-income groups. When taxes drive up prices, these consumers may turn to smuggled or unregulated products, which are often cheaper but pose greater health risks. Meanwhile, the widespread availability of cheap, unregulated 'grass beer' has persisted for many years without a comprehensive solution, especially in remote areas where income and education levels are low. As a result, the intended goal of safeguarding public health may be undermined, raising concerns about the actual effectiveness of the policy.
In terms of macro-economic benefit, the beer, alcohol and beverage industry currently contributes over VNĐ60 trillion to the State budget annually, accounting for nearly three per cent of total budget revenue. Beyond fiscal contributions, the sector creates jobs for millions of workers, plays a vital role in promoting economic growth, and supports social security. Additionally, the industry attracts significant foreign direct investment (FDI), contributing to export turnover and technology transfer.
A recent impact assessment – conducted by the Institute for Research, Industry and Trade Policy Strategy, the CIEM research group, the General Statistics Office, and the Vietnam Beverage Research Institute – warns that if the proposed SCT increase is too steep and implemented without a clear roadmap, the beer and alcohol industry could suffer substantial losses. This would negatively affect key economic indicators such as GDP, State revenue, employment and workers’ income, thereby undermining Việt Nam’s ambitious target of reaching high growth rates in the coming years.
The implications extend beyond domestic enterprises. Việt Nam’s favourable investment and business environment, which has become a bright spot for attracting FDI, may also be impacted.
For major FDI players in the beer and alcohol sector – such as Heineken, Carlsberg and Anheuser-Busch InBev – a sudden and excessive tax increase could prompt a reassessment of their long-term investment strategies in Việt Nam, despite the market's appeal due to its young population, strong consumer demand and competitive production costs.
If tax policy becomes unstable or excessively burdensome, these enterprises may shift their operations to regional alternatives like Thailand, Indonesia or India, where the business environment is more stable and tax regimes are more favourable.
Therefore, a comprehensive, balanced, and harmonised approach is essential. Policymaking should be grounded in practical realities and long-term perspectives, with a focus on aligning the interests of the State, businesses, and consumers. Instead of a 'shocking' 15 per cent tax increase in 2026, the Government should consider postponing the start date to 2028 and adopting a more gradual increase – similar to option one in the current proposal – with a 5 per cent annual rise capped at 90 per cent.
This approach would give businesses time to adjust their strategies, ensure steady growth in State revenue, and avoid abrupt disruptions in the market and maintain Việt Nam’s attractiveness as an investment destination.
Additionally, alongside any tax increases, the Government must strengthen market management to combat the proliferation of illicit alcohol – including floating, home-brewed and counterfeit products. These pose significant health risks and, if left unchecked, will undermine the objectives of the tax increase.
In the long term, the Government can consider using a hybrid system with a mix of relative and absolute taxes.
In Việt Nam, beer products are subject to relative taxes, meaning that tax costs were based on the selling prices, regardless of alcohol content.
Beer with high prices but low alcohol concentration has less impact on health, while beer with low prices and high alcohol concentration is subject to higher SCT rates. Thus, the relative tax system is creating inequity in tax costs among products with the same alcohol concentration level.
Absolute tax rate is a fixed monetary amount levied per unit of goods. In case of the beer industry, the absolute rate can be imposed per alcohol concentration.
If the proportion of relative and absolute taxes is built properly and has a clear roadmap, the hybrid taxes can balance the disadvantages of both relative and absolute taxes.
*Võ Trí Thành is former vice-president at the Central Institute for Economic Management (CIEM) and a member of the National Financial and Monetary Policy Advisory Council. With a doctorate in economics from the Australian National University, he focuses on macroeconomic policy, trade liberalisation, and institutional reform. He authors the Việt Nam News column Analyst’s Pick.