Vietnam’s Finance Ministry has announced plans to implement a phased tax increase on alcoholic beverages, a move that could further damage the country's already struggling beer industry. The proposed legislation, which seeks to significantly raise excise tax rates by 2026 and again by 2030, has sparked concern among brewers and hospitality businesses, many of whom are still reeling from previous regulatory challenges and declining consumer demand.

Steep tax hikes proposed for 2026 and beyond

The draft regulation proposes a sharp rise in excise taxes for all alcoholic beverages. Under the new system, the excise tax on beer and spirits with an alcohol content of 20% or higher will jump from 65% to 80% by 2026. Alcoholic drinks with less than 20% ABV will see their tax rise from 35% to 50%. By 2030, these rates are expected to climb even higher—reaching 100% for both beer and high-strength liquor, and 70% for lower-alcohol drinks.

According to the Finance Ministry, the measure is intended to discourage alcohol consumption for public health reasons. “Levying high tax rates is necessary to help reduce consumption of alcoholic drinks,” the ministry stated in its proposal.

These increases do not include a potential 2%–3% rise due to inflation, meaning the final cost to consumers could be even higher. The proposed legislation is currently awaiting approval from Vietnam’s lawmakers.

Short-term revenue, long-term strain

The Ministry estimates the tax hikes could generate an additional VND2.4 trillion (approximately US$94 million) in revenue. However, many within the industry fear the long-term effects could be catastrophic.

Vietnam’s beer market, once one of the fastest-growing in Southeast Asia, has been under pressure for several years. Since the implementation of a zero-tolerance drink-driving law in 2019, domestic consumption has dropped. Data from the Vietnam Beer Alcohol Beverage Association (VBA) reveals a 23% year-on-year decline in beer profits in 2023.

Multinational brewers like Heineken and Carlsberg, along with local giants Sabeco and Habeco, dominate the Vietnamese beer market. Yet even these powerhouses are feeling the pinch. Heineken recently announced a temporary suspension of operations at its Quang Nam brewery, one of six it runs in the country, citing declining sales.

A blow to consumer confidence and local industry

The steep increase in alcohol taxes is expected to hit consumer confidence hard, particularly among Vietnam’s growing middle class, which has been a key driver of beer and spirits consumption in recent years. As prices rise sharply, brewers fear a further decline in demand, threatening jobs, local supply chains, and the broader hospitality sector.

Imported brands may be especially impacted, as higher taxes and pricing could make them less competitive compared to local alternatives. However, with domestic producers also subject to the same tax structure, the industry as a whole is bracing for a difficult few years ahead.

Some industry observers warn that pushing taxes to 100% on beer and spirits by 2030 could drive consumers toward cheaper, unregulated alcohol products, undercutting the government’s public health objectives and creating new enforcement challenges.

Brewing sector at a crossroads

Vietnam’s beer industry now faces one of its most challenging periods in decades. Already weakened by tightening regulations, shrinking profits, and shifting social attitudes toward drinking, brewers must now prepare for a future of higher taxation and continued market contraction.

While the Finance Ministry views the proposed hike as a way to boost state revenue and reduce alcohol-related harm, its broader economic impact remains uncertain. For now, Vietnam’s brewing giants, including Heineken and Sabeco, are watching closely as the draft legislation moves through the approval process.

With profit margins already squeezed and consumer demand softening, the country’s beer sector may need to rethink its growth strategies—whether through innovation, diversification, or greater export focus—to weather the storm ahead.