On 7 November 2024, EuroCham’s Wine & Spirits Sector Committee (WSSC) met with Mr. Ulrich Weigl, Head of Trade at the EU Delegation to Vietnam, to discuss the Ministry of Finance’s (MOF) proposal to raise the Special Consumption Tax (SCT) on wine and spirits. Mr. Weigl was joined by Mr. Ky-Anh Le, Economic and Trade Specialist, with EuroCham represented by Mr. Jean-Jacques Bouflet, Vice-Chairman in charge of Advocacy, and WSSC members Mrs. Giang Trinh, Mrs. Siau Xi Goh, and Mrs. Truc Huynh. Also present were Mrs. Diep Truong, Advocacy Manager, and Mrs. Linh Dinh, SC Coordinator.
MOF’s Proposal and Potential Economic Impact
The MOF’s proposal outlines a 5% annual SCT increase on wine and spirits, set to take effect from January 1, 2026, and reach completion by 2030. Under this plan, SCT rates would rise from 50% to 70% for wine and from 80% to 100% for spirits. The draft SCT Law amendment is due for parliamentary debate in late November 2024, with adoption anticipated in May 2025.
The WSSC raised concerns about the broad economic implications of the SCT increase, particularly its potential impact on related sectors such as hospitality and tourism. The tax hike may also stimulate the illicit alcohol trade, threatening both public health and national tax revenues by creating a disparity between legal and illegal products.
Key Discussion Points and Proposed Solutions
- Strengthening Collaboration: Both parties underscored the need for enhanced collaboration between EuroCham’s WSSC and the EU Delegation to engage effectively with Vietnamese authorities on SCT and to discuss possible ways to mitigate adverse impacts on the industry.
- Protecting EVFTA Trade Benefits: The WSSC emphasised that the SCT increase could undermine the benefits secured under the EU-Vietnam Free Trade Agreement (EVFTA), particularly the customs duty reductions on wine and spirits scheduled for 2027. Such an increase may negate the trade gains the agreement was intended to promote, affecting European businesses and potentially reducing Vietnamese access to high-quality imported goods.
- Addressing Unrecorded Alcohol Consumption: The WSSC warned of a likely rise in unrecorded alcohol consumption due to higher SCT rates, noting that Vietnam already has a high rate of unrecorded alcohol consumption, estimated at up to 64%. This trend poses significant public health risks, as consumers may turn to cheaper, unregulated options, further exacerbating the divide between legal and illegal markets.
