Việt Nam News

Ministry proposal to slap new tax on tobacco comes under fire

July 25, 2024 - 08:08

The Ministry of Finance has proposed a bill to levy a new fixed tax on cigarettes in addition to the current excise tax of 75 per cent as the Government seeks to reduce consumption, but it has divided opinions.

A sharp increase in taxes on tobacco in a proposed bill by the Ministry of Finance would make it difficult for customers and businesses to adapt and conceivably increase cigarette smuggling, experts warn. VNS Photo Đoàn Tùng

HCM CITY – The Ministry of Finance has proposed a bill to levy a new fixed tax on cigarettes in addition to the current excise tax of 75 per cent as the Government seeks to reduce consumption, but it has divided opinions.

The bill suggests two options for the fixed rate.

The first seeks to impose VNĐ2,000 (US$0.07) per pack in 2026 and subsequently increase it by the same amount annually to reach VNĐ10,000 (US$0.39) by 2030.

The other is VNĐ5,000 (US$0.19) in 2026 and an increase of VNĐ1,000 (US$0.03) every year after. In 2030 it will be set at VNĐ10,000.

While the excise tax accounts for 75 per cent of factory prices, it is only 38.8 per cent of retail prices, the ministry said.

It is far below the 70 per cent recommended by the World Health Organisation and those in neighbouring countries such as Singapore (69 per cent), Thailand (70 per cent) and Brunei (81 per cent).

The ministry said the second option would be effective in reducing consumption since high prices would dissuade smokers.

Nguyễn Chí Nhân, general secretary of the Việt Nam Tobacco Association, said such a sharp increase in tax would make it hard for tobacco businesses to adapt.

He suggested an increase of VNĐ1,000 in 2026 then VNĐ500 (US$0.01) a year to reach VNĐ3,000 (US$0.11) by 2030.

Đinh Thị Quỳnh Vân, chairwoman of UK audit company PricewaterhouseCoopers, said since cheap cigarettes account for 75 per cent of the market such a sudden and sharp tax hike could spur smuggling.

Vân said this happened in countries such as Britain, Germany and Malaysia.

“So it is important for the ministry to have solutions to prevent tobacco smuggling and a clear tax increase roadmap.”

Nguyễn Thị Cúc, chairwoman of the Vietnam Tax Consultants’ Association, suggested the ministry increase the tax level gradually and in a stepwise manner to give customers and businesses time to adapt.

Việt Nam is among the top 15 countries in terms of number of smokers, with 15.3 million active and 33 million secondary ones.

Some 40,000 people die every year of smoking-related diseases. – VNS

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