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Article by Mr. Dinh Hong Ky, published in Nhip Cau Dau Tu Newspaper on February 26, 2012. According to statistics from the Eurowatch market research organization, in 2013 Vietnam consumed 3 billion liters of beer, equivalent to 3 billion USD. With this consumption level, a “poor” country like Vietnam is in the top 25 countries with the most terrible beer drinking in the world.
According to statistics from the Eurowatch market research organization, in 2013 Vietnam consumed 3 billion liters of beer, equivalent to 3 billion USD. With this consumption level, a “poor” country like Vietnam is in the top 25 countries that drink the most beer in the world. It is worth mentioning that the “rice farmer” Vietnam exported 2.95 billion USD worth of rice in 2013, but when he returned home, he “burned” it all on beer, exactly 3 billion USD! Meanwhile, the American magazine Thrillist ranked beer in Vietnam as the cheapest in the world. During many trips abroad, I found that beer in Vietnam is often 3-5 times cheaper than in other countries. It is clear to see the connection between the extremely cheap price of beer and the terrible consumption of Vietnamese drinkers.
The story is similar for cigarettes. The price of a pack of the same type of cigarette in Germany is more than 7 times more expensive than in Vietnam. The World Health Organization (WHO) in Vietnam said that in countries with effective tobacco control policies, cigarettes are taxed from 65% to 80%. Meanwhile, in Vietnam, the highest tax rate on cigarettes is only 45%. Recently, the government planned to increase the consumption tax on alcohol, beer and cigarettes. This increase is necessary and has received the consensus of society. However, although the increase is considered quite low (about 15% more) and the implementation period is quite late (expected to be applied until July 1, 2015), it has encountered resistance from interest groups. Recently, I read articles in the TBKTSG newspaper stating different opinions on increasing taxes on alcohol, beer and cigarettes. In particular, there was an article about a statement by the Chairman of the beer company with the largest production in Vietnam today. This can be said to be a typical reaction of interest groups when their interests are affected. This Chairman believes that the state’s tax increase to increase budget revenue is “guerrilla thinking”. I do not know whether this tax increase, which helps the state collect an additional few thousand billion VND each year, can be considered “guerrilla” or not. I would like to cite some examples from some developed countries. In France, in early 2000, the price of a pack of Marlboro cigarettes was only 2€, but in 2003 it increased to more than 4€ because the French government increased taxes each year. And after more than 10 years, the price of a pack of Marlboro in France is now 5.3€. The French government calculates that increasing cigarette taxes will bring the state an additional source of income of nearly 1 billion € each year. Most of the money from cigarette sales in France goes into the public fund. For the best-selling cigarette, according to the new tax increase, 79% of the proceeds go to the government, 13% to the manufacturers and distributors, and only 8% to the tobacco shop owners. Japan is also an example, since 2002, thanks to the tax increase on cigarettes, tax revenue has increased by about 19.5 billion USD per year, while the number of smokers in Japan has decreased by about 1/3. Perhaps if developed countries apply the “guerrilla thinking” style that brings such great benefits to society and the country, then we should learn from it. The chairman of the beer company also said that because the profit margin of foreign beer companies in Vietnam is larger than that of Vietnamese beer companies, increasing taxes will cause damage to Vietnamese companies. He used the image of a 5m and 10m pole to compare when the river water rises. There is no need to comment on this “economic theory” and that is not to mention that there will be people who ask why in the same market, foreign beer companies have such large profits while the beer company with the largest output in the country like you has much lower profits than them. The Chairman should use the image of “when the water rises, the boat rises” which would be more appropriate in this case to propose a competitive strategy. There are also opinions that increasing taxes is a golden condition for smuggling. I would like to say that countries with much higher tax rates than us can still control smuggling. That is because they effectively control the country through customs, police, market management, etc. Increasing taxes to generate revenue for the budget is the job of the Ministry of Finance and the General Department of Taxation. From a certain perspective, these two things are independent! There is also an opinion from the General Director of a foreign beer company in Vietnam who “threatened” that increasing taxes on alcohol and beer will increase CPI and inflation. It is funny to recall that in recent years, the country that is considered to have the cheapest beer in the world is also one of the countries leading in inflation. The top 5 countries with the cheapest beer as assessed by Thrillist magazine (USA) are: Vietnam, Cambodia, Ukraine, Philippines and Ethiopia, which are countries with high inflation rates in the world. Ultimately, when a tax policy is introduced by the State, it will affect the interests of the relevant groups and their reaction is natural. As an example of this story, I would like to continue the story of the increase in tobacco tax in France mentioned above. The French tobacco business was so angry at the government’s tax increase that they responded by closing all retail tobacco stores on the day the new tax rate was applied. However, the French government did not back down, because according to a published survey, nearly half (48%) of the French people supported increasing tobacco and alcohol taxes to reduce the deficit in the social security fund. The public health impact of the tobacco tax increase was evident when, within just 7 months of its implementation, cigarette consumption in France fell by 4.5 billion cigarettes. In the Philippines, the government had a policy of increasing taxes on alcohol, beer and cigarettes since 1997 and submitted it to the National Assembly. However, the country’s vested interests lobbied to delay this policy for… 16 years! It was only implemented in 2013 and has brought the Philippines 800 million USD each year. This story shows that, for the country’s decision makers, the formulation of a policy must first be based on the interests of the country and its people, not just focusing on a certain interest group.
Sai Gon, 20/04/2014
Dinh Hong Ky
