Craft Beer Shutdown Costs Quang Nam Province $20 Million in Annual Revenue

On July 7th, the Quang Nam People’s Committee Office announced that they have requested the provincial Tax Department to coordinate with relevant agencies to review Heineken Vietnam Brewery’s proposals regarding the draft Law on Special Consumption Tax Amendments. The company had previously submitted their feedback and suggestions on the draft law to the People’s Committee.

According to Heineken, the post-COVID-19 economy, including the beer industry, faces significant challenges due to slow economic growth, resulting in reduced consumer confidence and demand. Additionally, the strict enforcement of Decree 100 on blood alcohol content limits for drivers has led to changes in behavior and habits. The Vietnamese beer market experienced a double-digit decline in 2023 and continues to contract in 2024.

The company argues that increasing tax rates during this period requires careful consideration. Given the prolonged economic recession, an immediate tax hike could exacerbate the situation as individuals and businesses are still recovering. A rapid increase in taxes may cause consumers difficulty in adjusting their spending, leading to reduced purchasing power and negative market impacts. It is essential to thoroughly assess the elasticity of demand in relation to price changes.

“An increase in special consumption tax will lead to higher prices and subsequently lower consumption. This could result in serious consequences such as tax revenue losses for the government, closure of production facilities, and rising unemployment in the industry,” the company stated. They suggested a more cautious approach by extending the tax increase timeline and reducing the tax hike to allow consumers time to adapt to new prices, avoiding a “tax shock” from sudden price hikes while ensuring budget revenues and maintaining consumption demand.

Heineken Vietnam proposed three key recommendations regarding the current special consumption tax schedule, a gradual tax increase, and a long-term tax reform strategy. Recently, Heineken Vietnam closed its brewery in Quang Nam, the smallest of its six breweries in the country. The closure will result in significant revenue losses for the province, estimated at nearly VND 500 billion annually, with contributions in previous years reaching up to VND 1,000-1,200 billion.