Young people join a contest about the Law on Prevention and Control of Tobacco Harms in Lai Châu. — VNA/VNS Photo Quý Trung

HÀ NỘI — The latest report by the World Health Organisation (WHO) shows that estimated medical and economic costs caused by tobacco in Việt Nam reached VNĐ108 trillion (US$4.2 billion) last year, five times higher than the revenues gained under the current tobacco tax.

The costs of tobacco harm were equivalent to 1.14 per cent of gross domestic product (GDP) in 2022.

Smoking is the leading cause of serious diseases such as lung cancer, cardiovascular disease and respiratory diseases.

It places a heavy burden on the public health system, reduces labour productivity and negatively affects social life.

Việt Nam has set a very high growth target this year, which is both a driving force for reform, but also faces many difficulties and challenges in making the most important decisions, especially in the current post-pandemic and global economic downturn.

In addition to ambitious economic development goals, Việt Nam is also a country with strong commitments to implementing sustainable development goals through growth strategies, such as the Việt Nam Sustainable Development Strategy 2004, the Việt Nam Sustainable Development Strategy for the 2011-2020 period, and the National Action Plan to realise the 2030 Agenda for Sustainable Development.

Excise tax

Excise tax is not only a fiscal tool, but also an important measure to regulate consumer behaviours, reduce dependence on harmful products and encourage people to switch to healthier consumption choices.

This is not only beneficial to public health but also creates conditions for other manufacturing and service industries to develop, thereby contributing to sustainable economic growth.

By reducing tobacco consumption through tax increases, the Government can reduce the burden of health costs, allowing resources to be used more efficiently for other goals.

One of the important goals of increasing tobacco taxes is to protect public health, reduce smoking rates and cut the numbers of tobacco-related diseases.

Public health is an important factor in the sustainable development of the economy. When public health is protected, medical costs will be reduced, workers will be healthier and more productive.

At a recent workshop organised by the Việt Nam Centre for Economic and Strategic Studies (VESS), Đào Thế Sơn, an expert from the International Union Against Tuberculosis and Lung Disease, said that if taxes were increased, the number of smokers would decrease, thus improving health and the workforce.

In the case of no tax increase, from now until 2030 it is estimated that Việt Nam will have 2.46 million more smokers.

Key and effective strategy

WHO's calculations show that under the second option proposed by the Ministry of Finance in the draft Law on Special Consumption Tax, if next year the tax rate is 75 per cent plus a tax rate of VNĐ5,000 ($0.19) per pack and each year after that the absolute tax rate increases by VNĐ1,000 per pack and by 2030, the tax increases to VNĐ10,000 per pack, it will help reduce the rate of adult smokers by 2.9 percentage points in 2030 compared to 2020.

It will also contribute an additional VNĐ21.8 trillion ($851.6 million) to the budget revenue.

According to WHO’s calculations, to achieve the goal of the National Strategy on Tobacco Harm Prevention, in addition to the 75 per cent tax rate, the absolute tax rate required to be applied until 2030 is VNĐ15,000 ($0.58) per pack, which will add an additional VNĐ29 trillion ($1.1 billion) into the State budget.

While tobacco companies have consistently sought to delay tax increases, arguing that they could increase cigarette smuggling, statistics show that illicit cigarette consumption in Việt Nam has declined, from 20.7 per cent in 2012 to 13.7 per cent in 2017, which is attributed to stronger anti-smuggling efforts.

Simulation scenarios on the impact of increasing excise tax on tobacco products conducted by the Central Institute for Economic Management (CIEM) show that increasing excise tax revenue from tobacco will ensure the ability to pay for new sustainable development goals (SDGs) and especially reduce the poverty rate and income inequality.

Head of the General Research Department under the CIEM, Nguyễn Anh Dương, said that Việt Nam needed to firmly believe that increasing special consumption tax would be a key and effective strategy to reduce tobacco consumption, especially among children.

Increasing tobacco taxes would help improve workers’ health, thereby increasing productivity, reducing healthcare costs, creating good conditions for education, and increasing savings for investment and business activities, he said.

In addition, revenues from increased tobacco taxes would help supplement resources for the State to conduct sustainable economic development programmes. — VNS