Vietnam’s Finance Ministry has unveiled plans for a phased excise tax increase on alcohol, a move that is expected to have serious implications for the country's beer and spirits industries. The draft legislation, currently pending parliamentary approval, proposes steep hikes for both beer and high-alcohol drinks, marking a significant shift in the government’s approach to alcohol regulation.

According to the draft, prices of beer and liquor will rise by 20% by 2026, with further increases of 2–3% possible, depending on inflation levels. The policy is being framed as a public health initiative, aimed at reducing overall alcohol consumption in the country.

“Levying high tax rates is necessary to help reduce consumption of alcoholic drinks,” the ministry stated, emphasizing the societal impact of alcohol-related harm.

Doubling down on excise taxes

Under current Vietnamese tax law, beer and spirits with an ABV of 20% or more are taxed at 65%, while lower-ABV beverages are subject to a 35% excise tax. The Finance Ministry’s proposal would see these rates jump to 80% for beer and high-strength liquor, and 50% for lower-ABV drinks by 2026. By 2030, these taxes are expected to reach 100%, 70%, and 100% respectively.

The ministry projects the tax hikes will raise an additional VND2.4 trillion (US$94 million) in the short term, helping to boost state revenue.

Beer industry faces growing pressure

The new proposal comes at a difficult time for Vietnam’s beer sector, which has already been grappling with reduced demand due to strict alcohol regulations. Since 2019, Vietnam has enforced a zero-tolerance drink-driving law, drastically impacting on-trade alcohol consumption. These restrictions have been particularly harsh on beer sales, which make up a significant portion of Vietnam’s alcohol market.

The country’s beer industry is dominated by a mix of global and local players, including Heineken, Carlsberg, and Vietnam’s own Sabeco and Habeco. According to data from the Vietnam Beer Alcohol Beverage Association (VBA), the industry saw a 23% drop in profits year-on-year in 2023.

As a result of weakening sales, Heineken recently announced a temporary suspension of operations at its Quang Nam brewery, one of six it operates in Vietnam.

Long-term concerns for producers and consumers

Industry observers fear that these tax increases will further destabilize an already vulnerable sector. While the government’s public health rationale is clear, the decision could accelerate closures, job losses, and market exits, especially for smaller breweries and domestic producers unable to absorb the additional costs.

Critics also warn that such dramatic tax changes might drive up the cost of alcohol for consumers, fuel illicit alcohol production, or incentivize cross-border smuggling from neighboring countries with lower excise rates.

Nonetheless, the Ministry of Finance appears committed to implementing these changes, positioning the move as part of a broader push for healthier lifestyles and greater revenue in the post-pandemic era.

If passed, the new Vietnam alcohol tax regime could represent one of the most significant shifts in the country’s beverage alcohol landscape in decades, reshaping consumer behavior and business models alike across the region.