Vietnam: Experts want strong tobacco tax hike

10 May 2018:

HCMC – The Ministry of Finance has proposed an additional special consumption tax of VND1,000 for each pack of cigarettes on top of the current special consumption tax rate of 70%, but experts said this extra amount is too small to discourage smoking in Vietnam.

Nguyen Tuan Lam, an expert at the World Health Organization (WHO), cited WHO data as saying that taxes make up a small production of Vietnam’s tobacco retail prices, at 35%, whereas the world’s average is 58.6%.

Compared to other ASEAN countries, this proportion is higher than in Cambodia, Laos and Myanmar.

Vietnam is among the countries having the lowest average tobacco prices in the Western Pacific, according to the 2015 WHO report on global tobacco control, Lam said.

WHO data showed tobacco in Vietnam causes annual damages of up to US$1.1 billion, including medical costs for lung cancer, stroke and tobacco-related health problems.

The WHO and the World Bank (WB) have projected that if the tobacco price increases by 10% as a result of tax hike, tobacco consumption in developing countries could drop 5%, Lam was quoted by news website VietnamPlus as saying. 

However, in Vietnam, the tobacco tax and price are low, resulting in a large number of smokers.

With the special consumption tax on tobacco rising to 65% in 2008, 70% in 2016 and 75% next year, Dao The Son, a lecturer at Hanoi’s Thuong Mai University, said the duration between two nearest tax hikes is long while the hikes are slight, only 5%.

The tax increase roadmap, according to Son, has been ineffective. Tobacco consumption normally declines only in the years when the tax is hiked.

According to the special consumption tax increase proposal of the Ministry of Finance, there will be two plans. The first is to use a mixed method which consists of a tax rise of 5% to 75% in 2019 and a collection of VND1,000 per pack of 20 cigarettes and VND1,500 per cigar from 2020.

In the second plan, the special consumption tax will increase as in the roadmap from 75% to 80% in 2020 and 85% in 2021.

Commenting on these plans, Son said the first is better than the second. The second plan is likely to prompt a shift in tobacco consumption from highly priced tobacco to lowly priced tobacco as cheap tobacco is subject to a milder price increase, he explained.

Meanwhile, the mixed taxation method will charge several thousand dong no matter how much the tobacco price is. This will help reduce smoking by low-income people and youngsters.

Lam said the absolute tax of VND1,000 per pack is small whereas Vietnam’s target towards 2020 is to reduce the ratio of male smokers to 39% from 45.3% last year.

According to Son, the additional charge should be VND2,000-5,000 per pack of 20 cigarettes. If every pack is charged VND5,000, the State budget could collect an additional VND10.7 trillion a year.

Source: The Saigon Times