French drink-makers eye Vietnam
Wishing to cash in on Vietnam’s skyrocketing demand for drinks, French beverage firms have asked local authorities to ease special consumption tax lines, which they find to be too high and contrary to the country’s commitments of reducing taxes for beverages under the EU-Vietnam Free Trade Agreement.
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“We are preparing to engage more in Vietnam, where the demand for spirits and wine is growing strongly. The EU-Vietnam Free Trade Agreement (EVFTA) will enable us to do better business in Vietnam,” he said.
Pernod Ricard currently operates more than 85 branches and 100 production workshops around the world. Its revenue in 2015 totaled at over €8.5 billion ($9.02 billion).
However, at yesterday’s Vietnam-France high-level economic dialogue in Hanoi, French Minister of State Jean-Baptiste Lemoyne said that French beverage firms like Pernod Ricard will find it difficult to penetrate Vietnam, even though the country has committed to reducing import tariffs for EU drinks under the EVFTA.
Under the EVFTA, which is expected to be ratified in 2018, Vietnamese tariffs for wines and spirits will be removed seven years after the deal’s entry into force. The tariff for European beer will follow after 10 years.
“Since the conclusion of the EVFTA, Vietnam has reformed its special consumption tax (SCT) in a way that nullifies the EU’s legitimate expectations of improved market access opportunities for European wines and spirits,” Lemoyne said. “Drink exporters will not be able to boost their exports to Vietnam.”
Nguyen Thuy Linh, a representative from the Ministry of Finance, told Lemoyne that under Vietnam’s law amending a number of articles of the Law on Special Consumption Tax No.70/2014/QH13, which took effect on January 1, 2016, all wine and spirits products in Vietnam are subject to high SCT levels because they are special items that can affect human health.
Vietnam has increased SCT for alcoholic beverages by 5 per cent annually from 2016 to 2018. Taken together, the new regulations will make imported alcoholic beverages much more expensive.
Specifically, SCT for alcoholic beverages containing 20 per cent alcohol by volume or more (mainly spirits) was raised to 55 per cent from January 1, 2016, to 60 per cent from January 1, 2017, and to 65 per cent from January 1, 2018.
These tax increases have also been applied to beer. SCT for alcoholic beverages containing less than 20 per cent alcohol by volume has been raised to 30 per cent from January 1, 2016 and to 35 per cent from January 1, 2018.
“We highly recommend that Vietnam create favourable conditions for French wine and spirits products in the Vietnamese market,” Lemoyne said.
According to the Delegation of the European Union to Vietnam, Vietnam has committed itself to ensuring that the conditions for the distribution and sale of spirits will not become more restrictive than at present and that it will abide by certain principles while issuing licences for wines.
Also under the EVFTA, many EU geographical indications will be protected in Vietnam automatically upon the deal enters into force.
