Cheap tobacco prices increase access and purchase of tobacco
The Ministry of Finance has proposed a draft amendment to the Law on Special Consumption Tax, in which it proposes to increase tobacco taxes in the direction of adding absolute taxes.
Ms. Phan Thi Hai, Deputy Director of the Tobacco Harm Prevention Fund (Ministry of Health) said that Vietnam is still one of the 15 countries with the largest number of adult men in the world who smoke.
A representative of the Tobacco Harm Prevention Fund said: Using tobacco has caused a great burden of disease and death, threatening the economic and social development in Vietnam.
Every year, Vietnam has more than 84,500 deaths from active smoking and 18,800 deaths from diseases caused by exposure to secondhand smoke. Most of the people who die from tobacco-related diseases are of working age, meaning premature death.
One of the main reasons for the high and slow decline in the smoking rate is that Vietnam's tobacco tax is still very low. Cheap tobacco prices increase the access and purchase of tobacco for adolescents and the poor.
Meanwhile, tobacco taxes are considered one of the most effective measures to prevent young people from starting to smoke and help those who are smoking quit. However, tax measures will only truly be effective if tobacco taxes are increased to a meaningful and regular level.
The current Law on Special Consumption Tax in Vietnam is applying a special consumption tax rate of 75% and the taxable price is the factory price. The rate of tobacco tax calculated at retail price only accounts for 38.8% of retail price.
According to the global report of the World Health Organization, Vietnam is among the 15 countries with the lowest tobacco price in the world. If the current consumption tax is maintained, Vietnam cannot achieve the goal of the national strategy on the prevention and control of tobacco harms until 2030 (reducing the rate of tobacco use among the male group aged 15 and above and under 36 %;
With this retail price, cigarettes are very accessible to low-income people, children and adolescents.
The Ministry of Health estimates that the economic losses to society caused by active and passive smoking account for 1.14% of GDP, equivalent to more than VND108,000 billion/year. This cost is 5 times higher than the revenue from tobacco taxes.
The WHO has calculated that if each country increases tobacco tariffs by 10%, consumption will decrease by an average of 4% in high-income countries and 5% in low- or middle-income countries. For Vietnam, that number can be up to 8%.
2 options to increase tobacco taxes
In the draft amendment to the Law on Special Consumption Tax (amended), the Ministry of Finance proposed to increase tobacco tax in the direction of adding absolute tax.
According to option 1, the tax rate will remain at 75% and the tax will be added absolutely. Specifically, from 2026, each pack of cigarettes will be subject to an additional VND 2,000 in absolute tax. From 2027 to 2030, this tax rate will increase by 2,000 VND per year, reaching 10,000 VND/bag by 2030.
With option 2, the tax rate will remain at 75%, but from 2026, an absolute tax of VND 5,000/pack will be applied. Each year will increase by 1,000 VND/bag, and by 2030, it will reach 10,000 VND/bag.
The Ministry of Finance is leaning towards option 2 because it believes that increasing taxes absolutely from 2026 will create a clear change in reducing tobacco consumption.
The tobacco tax plan recommended by the Ministry of Health and WHO is to apply a mixed tax system including a tax rate of 75% of retail price and an absolute tax increasing to at least VND5,000 per pack of cigarettes by 2026 and gradually increasing according to the roadmap to VND15,000 per pack by 2030.
Mr. Nguyen Tuan Lam, WHO's tobacco control expert in Vietnam, said that experience from many countries shows that mixed-use taxes significantly reduce tobacco consumption while increasing budget revenue stably.
Increasing tobacco taxes will increase selling prices, thereby encouraging consumers to reconsider their usage habits, contributing to reducing dependence on this harmful product.
