Tobacco taxes must rise in Vietnam
“It is estimated that if Vietnam increased tobacco tax by 20 percent a year, the price would increase by about 10 percent. This would result in a decrease in consumption of about 5 percent, but at the same time, increase government revenue by about VND 1,900 billion (USD 100 million) each year."
That is the conclusion of the Vietnam Tobacco Tax Report Card, published by HealthBridge, the Department of Tax Policy, Ministry of Finance, Vietnam and the Southeast Asia Tobacco Control Alliance.
The Report Card notes that the real price of cigarettes in Vietnam is relatively low and has been decreasing in recent years while at the same time, per capita income has risen significantly. As a result, cigarettes have become more and more affordable in the country, which has led to more production and sales.
While higher taxes could translate into higher prices, the current tobacco tax as a percentage of retail sales is low (43 percent) compared to the World Bank's recommended level of 65-80 percent.
The Report Card recommends that the Vietnamese government increase tobacco tax at a rate higher than the combination of inflation and income growth so that tobacco demand will be curbed over time, thus fulfilling the country's health objective and obligation under the WHO Framework Convention on Tobacco Control (FCTC).
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