The impacts of alcoholic and non-alcoholic beverage tax on different income groups in Vietnam

Abstract

Rapid growth in the consumption of alcoholic and non-alcoholic beverages has become a major public health concern in Vietnam. This study assesses the potential impacts of excise taxation on the consumption and welfare distribution of alcoholic beverages (beer and liquor) and non-alcoholic beverages, using nationally representative data from the 2018 Vietnam Household Living Standards Survey (VHLSS) and a quality-adjusted Quadratic Almost Ideal Demand System (QUAIDS). We estimate price and expenditure elasticities and simulate alternative excise tax scenarios. The results indicate that demand for beverages in Vietnam is price responsive. A simulated 20% excise tax on non-alcoholic beverages is associated with a reduction in consumption of approximately 31%, while a 20% increase in alcohol excise taxes is associated with reductions of about 29.7% for liquor and 26.6% for beer. These effects are strongest among low-income households, reflecting greater price sensitivity. The simulated tax burden remains modest—equivalent to around 0.46% of total household expenditure for non-alcoholic beverages and 3.9% for alcoholic beverages—while generating additional fiscal revenue. These findings suggest that excise taxation on beverages, particularly when designed to target harmful products such as sugar-sweetened beverages, can contribute to reduced discretionary beverage consumption and support fiscal sustainability. Integrating tax reforms with complementary measures, including nutrition education and non-communicable disease prevention, may further enhance equity and effectiveness.