Circular No. 465-TC-VP provides explanations on the policy for unified management of alcohol trade.

CIRCULAR

Explanation of the unified management policy for alcohol business

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 Why is it necessary to unify the management of alcohol?

Policies regarding the alcohol business.

Policies towards ethnic minority regions.

The alcohol management apparatus.

Part One:

WHY IS IT NECESSARY TO UNIFY THE MANAGEMENT OF ALCOHOL?

A. THE SITUATION OF ALCOHOL IN OUR COUNTRY DURING THE FRENCH COLONIAL PERIOD

Drinking alcohol is a custom of the people. After the French colonialists invaded our country, the use of alcohol was further encouraged and developed by the French.

Alcohol can be divided into five types:

1) Drinking alcohol

2) Alcohol used for preparing medicines and generally in medical purposes (including both Traditional Chinese Medicine and Western Medicine)

3) Alcohol used in industries (wood workshops, paint workshops, tobacco factories...)

4) Alcohol for machinery

5) Burning alcohol (ethanol)

Among these five types, drinking alcohol is the most common and has the largest quantity.

I. THE ALCOHOL REGIME UNDER THE FRENCH COLONIAL PERIOD

Because alcohol was widely used and abundant among the people, the French colonialists aimed to firmly control the revenue from alcohol to strengthen their ruling apparatus and enrich French capital.

Some colonialists openly stated: "To rule Indochina, one only needs to control salt, alcohol, and opium."

We see that among the financial resources of Indochina, customs duties constitute the main part, accounting for twenty percent on average; additionally, opium, alcohol, tobacco, and salt are major sources of income, as they have been divided into various taxes such as land tax, household registration tax, property tax, and territorial tax for the three-period budget.

Specifically, alcohol tax was a relatively stable source of revenue for the colonialists; it accounted for eight to eleven percent of the annual budget of Indochina. Therefore, shortly after occupying South Vietnam, they enacted the alcohol tax and gradually progressed towards a monopoly throughout Indochina.

- Implementation of the alcohol tax began on April 21, 1862.

- Monopoly on alcohol (monopoly on production, sale, transportation, and import/export).

1) The tender system for alcohol business was established on October 5, 1921.

2) The direct responsibility system of the Dong company from 1902 to 1913.

3) The indirect responsibility system of the Dong company from 1913 to 1933.

4) The pseudo "free competition" system (!): after 1933, although the form changed, the substance remained a monopoly because Phong Ten alcohol still dominated ninety-five percent of total alcohol production in Indochina and was supported by the entire colonial ruling apparatus.

II. PRODUCTION AND CONSUMPTION SITUATION

During the French colonial period, alcohol consumed in our country had three sources:

1) Drinking alcohol and ethanol produced by capitalist colonial enterprises. Besides French factories, there were more than ten Vietnamese and Overseas Chinese workshops, but their production volume was insignificant.

2) Drinking alcohol secretly brewed by the people in rural areas: this type of alcohol was very abundant, with almost every plain and midland province having villages specializing in brewing alcohol for generations, which the French could not stop.

3) Imported alcohol:

Western alcohol (wine, beer, liqueur...) imported from France (and a small number of other countries) into Indochina.

Among the above types of alcohol, Phong Ten alcohol and "plain alcohol" brewed by local farmers were the two most consumed types. The majority of the population was accustomed to white liquor, while cities and towns mainly consumed Western alcohol (wine and liqueur). During the French colonial period, on average, each person consumed about four liters of Western alcohol annually, excluding "plain alcohol" if the French did not detect it. If we include "plain alcohol" and other types of alcohol, the average consumption per person was around seven to eight liters annually.

The amount of imported alcohol was also considerable:

B. THE SITUATION OF ALCOHOL IN THE OCCUPIED ZONE DURING THE 8-YEAR RESISTANCE WAR

After the August Revolution's victory, to conserve food, on November 19, 1945, our government issued Decree No. 57 banning the brewing of alcohol using rice. After the outbreak of resistance in the occupied zone, the French again encouraged drinking alcohol. However, Phong Ten alcohol could no longer dominate rural areas as before, leading to increased brewing by farmers, competing with Phong Ten alcohol in the market.

Although there is no complete data on the production and consumption of alcohol in rural areas, it is likely quite substantial, as after liberation, there were still approximately five to six thousand households producing alcohol in newly liberated rural areas.

C. THE RECENT SITUATION OF ALCOHOL

For over nine years, from the issuance of Decree No. 57 on November 19, 1945, until January 1955, the old free zone did not levy alcohol taxes (except for occasional taxes on cassava and corn alcohol...). The consumption of drinking alcohol decreased somewhat compared to before. Conversely, in newly liberated areas, alcohol production increased.

To limit alcohol production and simultaneously increase revenue for the government, a regulation on commodity tax (including alcohol tax) was implemented at the beginning of 1955. However, due to the general habit of prohibiting alcohol brewing, transitioning to taxing alcohol took some time to adjust mentally. Additionally, some village cadres who themselves brewed alcohol for personal gain did not strictly enforce the policy, causing significant revenue loss. As a result, the total revenue in 1955 was less than that of the first four months of 1956. In 1955, the total alcohol subject to tax was nearly three million liters, while this year, despite continued losses, the monthly average of taxed alcohol reached one million liters.

There are many reasons for revenue loss, but objectively speaking, the scattered and fragmented nature of small-scale production across rural areas is a significant obstacle to effective tax collection management.

At the alcohol tax conference convened by the Central Tax Department in October 1955, it was estimated that after the enemy withdrew, there were approximately fifteen thousand scattered alcohol producers north of the 17th parallel, and the Tax Department managed to collect taxes from over six thousand of them. To date, although many have ceased production, the estimated number remains around eight thousand, with over four thousand managed for tax collection. Despite the lack of strict management and oversight, missing many households and not fully understanding production conditions, the average monthly production of each alcohol producer in most provinces is over two hundred liters.

In Nghệ An, Thái Bình, Sơn Tây, and Nam Định, there are households producing up to 1,200 liters per month. In Hồng Quảng, there are households producing up to 1,500 liters. Additionally, throughout the plains and midlands provinces, many households produce from 300 to 400 liters.

If we temporarily estimate that each household produces at least 270 liters per month, then in a year there would be at least 26 million liters of alcohol (8,000 X 270 X 12). In reality, in all of 1955, only 3 million liters were taxed, which is more than one-eighth of the estimated production. The loss of alcohol tax revenue, of course, means that all aspects of the alcohol tax policy have not been implemented.

Besides the purpose of increasing revenue for finance, accumulating capital for the State, stabilizing currency and prices, the alcohol tax policy also aims to limit consumption, save rice, and protect people's health.

Last year, we did not achieve the requirements of the aforementioned policy; alcohol production and consumption did not decrease, and the number of people making and selling alcohol remained high. This unorganized business situation is very disadvantageous for our country's economy.

Experience from last year shows that it is very difficult to control all alcohol producers; moreover, even with control, the main issue of properly limiting alcohol production has still not been resolved.

Therefore, the question arises whether to reconsider the policy allowing private individuals to freely engage in alcohol business.

The experience of the Soviet Union and China shows us that for a thorough resolution of all aspects of the alcohol problem, the State must unify management of the alcohol business. The content of the unified management system for the alcohol business is:

All rights to production, sale, transportation, and import/export must be concentrated in a unified State management agency. The State must have factories producing enough alcohol for civilian use. This will end the chaotic production of alcohol, ensure people's health, save grain, guarantee taxes, and accumulate capital for the State.

Furthermore, the large profits usually obtained by private capital in the alcohol business will go to the State: this is also a measure to transform the industry of commercial alcohol businesses, guiding them to switch to other occupations beneficial to national planning and public welfare.

In the Soviet Union, the monopoly on alcohol was established after the October Revolution, when the State had to fight both internal enemies and external invaders. Thanks to the alcohol monopoly policy, the financial accumulation exceeded 500 million rubles annually.

In China, the alcohol monopoly was implemented during the anti-Japanese resistance. The revenue from alcohol sales was sufficient to fund the Huaihai Campaign, a decisive campaign in the war of liberation.

The alcohol tax revenue of China in 1954 could purchase five railway lines from Beijing to Guangzhou (each line being 2,388 kilometers long). The profit from alcohol enterprises in 1951 could purchase 24 generators of 2,500 kW.

Considering our country's circumstances and applying the experiences of friendly countries, on May 25, 1956, our Government issued a policy of unified management of the alcohol business aimed at:

1) Ending the chaotic production of alcohol, which affects agricultural work and rural production. When the State takes responsibility for alcohol production, it can guide tens of thousands of farmers back to farming and direct those involved in alcohol production to participate in other profitable occupations beneficial to national planning and public welfare.

2) Guiding the use of alcohol and protecting people's health. With the State controlling all alcohol within the country, alcohol consumption can be properly limited, and the quality of alcohol produced can be strictly controlled to ensure it does not harm the health of drinkers.

3) Saving grain. Alcohol produced by traditional methods consumes between 1.4 to 1.8 kilograms of glutinous rice per liter, while machine-produced alcohol uses only 0.9 kilograms per liter. Thus, if we estimate that the North consumes 26 million liters annually (on average 2 liters per person), machine production would save 23,400 tons of rice.

Machine production of alcohol can use corn, potatoes, cassava, etc., instead of glutinous rice. The annual savings in rice could reach nearly 50,000 tons. At the same time, alcohol factories will serve as outlets for surplus agricultural products and substandard rice for farmers, thus promoting agricultural production and solving the problem of substandard rice for the State.

4) Increasing revenue for finance. Alcohol taxes, which were previously lost, will now be guaranteed by state-owned enterprises, generating approximately 210 million dong annually for the treasury (26 million liters X 800 dong). This year, the revenue has already reached over 100 million dong.

Additionally, significant profits from state-owned alcohol retail stores will be gained.

Part Two:

POLICIES FOR ALCOHOL BUSINESS

The content of the unified management system for alcohol is: the State grants administrative and business rights to the Central Alcohol Bureau. These business rights include production, sale, transportation, and import/export. Any individual (state-owned or private) wishing to engage in alcohol business must apply to the Central Alcohol Bureau and operate under its supervision. Simultaneously, the Bureau will organize the business.

To ensure the effective implementation of unified management, we need a phased plan to implement the unified management system for alcohol. This plan distinguishes:

By locality

By period

By type of business (production, sale, or transportation...) according to Principles 2.1. Specific verification of the location, boundaries, and area of the project;

1) Cities first, countryside later:

Key areas first, wider areas later

(That is, implementing in cities first, then market towns, then rural areas; starting in key areas before expanding to other places).

2) Control first, sales later

(That is, strictly controlling first, then opening shops for sales).

3) Production based on market demand

(That is, determining production based on sales volume).

4) Unified wholesale first, unified production later

Specific policies

Based on these principles, the specific unified management policy for alcohol is as follows:

General Principles

Starting from the announcement of unified management of alcohol, all production, sale, transportation, and import/export activities are decided by the Central Alcohol Bureau.

For alcohol producers

The ultimate goal of the policy for unified management of alcohol business is to fully nationalize the production of alcohol. Private individuals will no longer be allowed to produce alcohol. However, it is not easy to transfer all alcohol producers to other occupations that may be more beneficial, but this must be done gradually over a considerable period of time because:

1) There are currently about 7,000 to 8,000 alcohol distilleries in the northern part of our country. Generally, the mindset of those who distill alcohol is to cling to their traditional occupation to make a living. Because producing alcohol through traditional methods is very easy, light work, highly profitable, and prone to tax evasion, it benefits animal husbandry.

Some alcohol distillers lack farmland and capital, and have relied on this occupation to support their families. In a short period of time, we cannot find alternative employment for them, as the overall economic situation of our country is still recovering and facing many difficulties. If we force them to stop immediately, it would affect the livelihoods of their families.

2) The supply capacity of factories is insufficient. Currently, factories can only provide approximately 600,000 liters of 40-degree alcohol per month, which accounts for about one-quarter of the actual alcohol consumption in the market. If private alcohol production ceases, there will be a severe shortage of alcohol, prices will rise, and consumers will blame our system.

Due to these two reasons, our policy towards producers must be extremely cautious, paying attention to three aspects:

- The living conditions of the producers

- Market demand

- Plans for alcohol taxation and business operations

Recent experience, especially in August, shows that state-owned alcohol has been released onto the market with over 300,000 liters, but it has had little impact on private producers. In fact, in some places like Bac Ninh, Phu Tho, Ha Tinh, Hai Phong, there is still a shortage of alcohol. On one hand, the amount of tax collected from private alcohol production remains high (772 million in July, over 811 million in August, including state-owned alcohol, total alcohol tax in August reached 1,036 million), on the other hand, state-owned alcohol continues to sell well.

This confirms the correctness of the above assessment.

Based on the current situation, when applying Article 7 of the Unified Management of Alcohol Business Regulations issued by the Prime Minister's Office, it should be flexibly implemented. Producers within the area mentioned in Article 7 may either be allowed to sell elsewhere or, if necessary, the Alcohol Bureau will purchase their products. If they cannot sell elsewhere and we do not purchase their products, we will assist and guide them to change professions (the Alcohol Bureau has provided specific guidance), based on the principle: not affecting the sale of state-owned alcohol, ensuring supply to the market, and not impacting the livelihoods of private alcohol producers.

The areas referred to in Article 7 of the Regulations, according to the current situation, do not include the entire province or district where there are management agencies for alcohol business, but are limited to the business area of state-owned alcohol shops, typically covering a radius of three to four kilometers around the shop. Outside this area, alcohol traders can continue to operate as usual (but they are not allowed to bring alcohol into the business area of state-owned alcohol shops). Producers in provinces without unified management agencies for alcohol remain under the management and taxation of the Tax Department as before.

For alcohol traders

To ensure that state-owned alcohol reaches consumers without going through multiple intermediaries, resellers, which would unjustifiably increase the price of alcohol, the principle is that the Alcohol Bureaus will organize wholesale stores to distribute alcohol to private retail shops, cooperatives... for sale to consumers. Additionally, some private individuals can be appointed as wholesalers for us, while retail sales are entirely entrusted (where conditions permit, additional entrustment to cooperatives and trade for retail sales).

For both retail and some wholesale traders mentioned above, education and organization into a supportive force for us are necessary. They must not engage in illegal alcohol trading, nor dilute alcohol with water or other substances. They must sell at the officially set price by the Central Alcohol Bureau...

In summary, we will strive to unite alcohol sellers, allocate a certain profit margin for them to participate in the implementation of the unified management policy of alcohol, on the principle that both public and private sectors benefit.

For alcohol transporters

At the initial stage of implementing the unified management system for alcohol, many private individuals are still permitted to produce alcohol. It is also possible that many people will produce alcohol illegally.

To strengthen anti-smuggling efforts and protect the business area of state-owned shops, control over alcohol transportation is needed:

1) In areas where there are unified management agencies for alcohol business, all alcohol transportation must be regulated by the Central Alcohol Bureau:

a) Alcohol outside the business area of state-owned shops is not allowed to enter the business area of state-owned shops.

State-owned shops will define a business area with a radius of three to five kilometers.

b) Alcohol within the business area of state-owned shops is encouraged to be sold outside if necessary. For example, if there is a shortage of alcohol outside, selling it out does not affect the private retail market.

2) In regions (provinces) without unified management agencies for alcohol business, the principle is that alcohol from these areas is not allowed to be brought into regions with such agencies (except with special permission from the Central Alcohol Bureau). Conversely, alcohol from provinces or cities with unified management agencies for alcohol business is encouraged to be sold in regions without such agencies. Simultaneously, transportation routes and sales locations must be specified. Transportation permits must clearly indicate quantity, alcohol strength, etc., transported according to the regulations stipulated in the management measures of the Central Tax Bureau.

For alcohol importers and exporters

The principle is to encourage exports and limit imports. We encourage alcohol exports to accumulate foreign currency, which is our policy regarding foreign trade.

Exporting alcohol will be handled directly by the Central Alcohol Bureau or can be entrusted to trade or private entities.

Both state-owned and private traders must obtain permission from the Central Alcohol Bureau before proceeding to customs for export procedures.

For the importation of wine from outside the country, it is currently not proposed to completely prohibit it, because we need to consider the demand for foreign wine for foreign guests and the market of large cities. However, imports must be strictly limited to save foreign currency, using that money to purchase more necessary goods abroad rather than wine.

Any person wishing to import wine must obtain a permit issued by the Central Alcohol Authority in accordance with the spirit outlined above.

The importation of wine by diplomatic missions, consular delegations, and international organizations will be regulated separately.

ALCOHOL POLICY

The unified financial management policy for alcohol business aims to ensure tax revenue and profit.

To better serve the alcohol business policy, the tax policy needs to differentiate according to types of alcohol. Therefore, the tax rate for different types of alcohol is set differently:

1) Alcohols made from rice, sugar, honey, and foreign alcohols such as liqueurs, western spirits, and wines, which are produced from foreign materials, have a tax rate of 50 percent. Rice is a primary staple food that needs to be conserved; sugar and honey are currently scarce in our country and are also essential, so using these three materials as raw materials requires a higher tax rate to limit their use.

2) Alcohols made from secondary grains (such as corn, sweet potatoes, cassava) and fruits (such as papaya, jackfruit, pineapple, orange, banana...) and domestic liqueurs have a tax rate of 40 percent.

Alcohols made from low-cost materials such as bran, syrup, molasses... should be subject to a lower tax rate to encourage production. The specific tax rate will be determined later by the Government. Currently, the tax rate is 40 percent.

3) Beer, although produced in a foreign style, has a very low alcohol content (usually only 5%) and is similar to beverages like orange juice or lemonade; beer is also harmless to the body, so the tax rate is 40 percent.⁰) is not different from beverages such as orange juice, lemonade; beer is also a product that is not harmful to the body, therefore, the tax rate is also forty percent.

4) Medicinal alcohol: From now on, only those alcoholic products that genuinely cure diseases will be recognized as medicinal alcohol. Those products labeled as medicinal alcohol solely for profit purposes will not be considered medicinal alcohol.

Therefore, if named as medicinal alcohol, it must be certified by the Central Health Authority to have therapeutic effects before being exempted from tax.

Other products previously labeled as medicinal alcohol but without therapeutic effects will no longer be called medicinal alcohol and will be treated as liqueurs for taxation purposes.

Alcohol is divided into two types: ordinary alcohol and denatured alcohol. Ordinary alcohol is the main ingredient for producing western spirits and liqueurs. Therefore, the tax rate is 50 percent and strict control measures must be implemented to prevent smuggling. Producers of western spirits and liqueurs who are "permitted" must be required to purchase alcohol from local alcohol management authorities.

However, ordinary alcohol used for medical and industrial purposes with certification from relevant ministries will enjoy a tax rate of 20 percent.

Denatured alcohol, which has been mixed with toxic substances and cannot be used to produce drinkable alcohol but can only be used for lighting alcohol lamps or industrial applications, will be subject to a tax rate of 20 percent.

Part III:

ALCOHOL POLICY IN REGIONS WITH ETHNIC MINORITY POPULATIONS

A separate policy is needed for regions with ethnic minority populations to support their underdeveloped economies, difficult living conditions, and possibly lower levels of education and political awareness.

Based on the economic and political conditions of each region, we will provide more or less support, as even within a region with ethnic minorities, there may be different economic areas.

1) Regions receiving significant support are those with extremely backward economies, difficult living conditions, far from towns, and away from major transportation routes...

In this area, regardless of whether they are ethnic minorities or Han Chinese living together, all will share the same system.

Homemade alcohol for drinking and for funerals, rituals, regardless of the raw material used, will not be taxed if its value does not exceed 120 kilograms of rice in a year (except during funerals and rituals when it is not counted). If sold at markets, taxes must be paid but at a lower rate than other regions. This alcohol cannot be transported to other regions (as alcohol in other regions must pay a higher tax rate and could compete unfairly).

If sold at markets, taxes must be paid but at a lower rate than other regions. This alcohol cannot be transported to other regions (as alcohol in other regions must pay a higher tax rate and could compete unfairly).

2) Regions receiving minimal support are areas where the economy and level of political awareness among the people are not much different or worse than those in downstream regions.

They are not allowed to produce alcohol for drinking, but during funerals and rituals, they can still apply to the unified management authority for alcohol business (if available) or the nearest Tax Office (if too far, then apply to the Village Administration Committee) for a permit and must pay taxes (at a low rate).

Selling homemade alcohol is treated the same as in plains regions, meaning they must pay the same tax rate as in plains regions.

The above policy for ethnic minority plains regions applies only in autonomous regions and regions with ethnic minorities recommended by the Administrative Committee of the region and approved by the Prime Minister's Office or the Ministry of Finance.

PART FOUR:

THE ORGANIZATIONAL STRUCTURE FOR ALCOHOL MANAGEMENT

The unified management of alcohol is overseen by the Central Alcohol Authority under the Ministry of Finance.

The organizational structure at various levels under the Central Alcohol Authority is led by both superior agencies and the same-level Administrative Committees.

At the inter-zone, zone, and city levels, Temporary Alcohol Branches are not organized.

At the provincial and city levels, Alcohol Sub-Branches are established.

At the district and urban district levels, Alcohol Departments are set up. Below the district and urban district levels, wholesale alcohol stores are organized.

Depending on the situation and work requirements in each locality, the establishment of these agencies will occur sooner or later.

After approval by superiors, the Central Alcohol Authority at various levels can organize alcohol businesses based on their capabilities and actual needs, especially organizing wholesale alcohol stores within their jurisdiction.

The specific tasks of the alcohol management agency are:

1) Leading and resolving all matters related to the production, sale, transportation, and import/export of various types of alcohol within their defined and announced authority.

2) Organizing alcohol business activities: production, sale, transportation, and import/export of various types of alcohol, as stipulated by superiors.

3) Collecting taxes on goods entering the alcohol market: Where alcohol management agencies have not yet been established, the Tax Department will continue to collect taxes.