Vietnam's parliament has approved a planned increase in excise taxes on alcohol from 65% to 90% by 2031. According to the ruling Communist Party, Vietnam has a problem with excessive alcohol consumption. We recall that since 2019 the country has also had a zero-tolerance rule for drunk driving.
The industry is not welcoming the government's new plans. Although Vietnam is the second largest beer market in Southeast Asia, supplies have been declining in recent years.
Public health issue
According to initial plans, excise taxes were to reach 80% in 2026 and increase to 100% in 2030. However, authorities are believed to have reduced the amount after lobbying from the alcohol industry. Lawmakers also approved a new 8% tax on drinks with more than 5g of sugar per 100ml of liquid, which will come into effect in 2027 and rise to 10% in 2028.
Last year, alcohol industry representatives warned that gradually increasing tax rates could lead to retail prices rising by at least 10% annually.
Deputy Prime Minister Le Thanh Long, who pushed through the law, said the higher excise taxes were necessary to address public health concerns. According to a report last year by the Department of Preventive Medicine under the Ministry of Health, alcohol consumption in the country has been steadily increasing, from 2.9 litres per person in 2005 to 7.9 litres in 2019.
Alcohol has also been found to be the second leading cause of death in Vietnam. Angela Pratt, the World Health Organization (WHO) representative in the country, said the WHO was "very pleased" with the decision by Vietnamese lawmakers, which is a win-win situation for everyone. Reducing the consumption of tobacco, alcohol and sugary drinks will lead to lower health care costs for decades to come, while at the same time generating additional revenue for key government priorities, along with excise taxes.
"Reducing the consumption of these unhealthy products will improve the health of the population, and with it, labor force participation and productivity," Pratt said.
Necessary funds for the state
Last month, Communist Party leader To Lam announced that the government was moving forward with its policy of providing free hospital treatment for every citizen. The goal is to cover 90% of the population by 2030. Currently, patients are required to cover about 45 percent of health care costs themselves. As a result, many families are falling into debt.
However, the Communist Party's ambitions will come at a high cost, especially given the serious demographic changes expected in Vietnam in the coming decades. The population is aging rapidly and the state fears that its working-age population will decrease, which will lead to an unprecedented burden on the state treasury.
The Vietnamese and illegal alcohol
According to the Vietnam Association of Beer and Alcoholic Beverage Producers, sales on an annual basis decreased by 23% in 2023. In 2022, they decreased by 7%. This is also one of the reasons why in June 2024 "Heineken" to close its Quang Nam brewery, one of six in the country.
Tim Wallwork, chairman of the International Spirits and Wines Alliance in the Asia-Pacific region, told DW that about 70% of alcohol consumption in Vietnam is not registered, with most people still drinking unlicensed and potentially deadly alcohol.
Last year, Southeast Asia's unregulated alcohol sector made international headlines after six tourists died after consuming methanol-laced shots in Laos. "Further increases in excise taxes risk pushing consumers towards these unregulated and potentially harmful products, undermining public health and law enforcement efforts," Wallwork said. However, the government has apparently decided that in the long run, implementing preventive measures will be cheaper.
Author: David Hutt