June 24, 2018 15:54

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To limit tobacco, absolute tax of 2,000 VND/pack must be collected

16:07 | 05/09/2017

VCN- That was a suggestion of Doctor Pham Thi Hoang Anh - Director of HealthBridge Canada Office in Vietnam when commenting on the proposal to apply the combined tax and special consumption tax (SCT) for cigarettes in the draft Law amending and supplementing 5 tax laws of the Ministry of Finance. 

to limit tobacco absolute tax of 2000 vndpack must be collected
Doctor Pham Thi Hoang Anh.

Currently, Law No. 70/2014/QH13 of Vietnam has stipulated the roadmap for the application of SCT rates for cigarettes from January 1, 2016, up from 65% to 70%; from January 1, 2019, increased from 70% to 75%. How do you rate this tax bracket?

According to a study to assess the impact of the increase in SCT rates on tobacco under Law 70/2014/QH13 made in 2016-2017, the tax rate was increased according to the roadmap stipulated in this Law that has had an impact on tobacco price increases and budget revenues, but the purchasing power of cigarettes has remained high, with higher incomes than retail prices and inflation.

It is expected that the number of smokers will increase, so the tax rate increase under the SCT Act 2014 does not meet the public health objective.

Specifically, the price of cigarettes only increased in the years of tariff increase in 2016 (the average price increases by 11% compared to 2015) and by 2019 (the average price increases by 2.5% compared to 2018) deliveries, the remaining years 2017 and 2018 and after 2019, tobacco prices tend to be cheaper due to inflation and economic growth.

Second, tax revenue will only increase in the tax year 2016 and 2019 - as proposed by Law 70/2014/QH13 (an increase of 1,334 billion VND in 2016, equivalent to a 9% increase over 2015 and 1.900 trillion VND in 2019 compared to 2018).

Tariff increases in 2016 and 2019 have no significant effect on reducing smoking rates, less than 1% within 4 years. The number of smokers is projected to increase by 450,000.

According to the World Health Organization (WHO), tobacco is one of the leading causes of morbidity and death in the world. Vietnam is among the 15 countries with the highest number of smokers in the world. To limit this, the Ministry of Finance is planning to adjust the tax calculation of this item by the absolute tax of 1,000 VND/pack cigarettes 20 cigarettes and 1,500 VND/cigar. Do you think this can help Vietnam achieve its goal of limiting people, especially young people, to accessing tobacco and contributing to the protection of public health?

We support the option of levying additional taxes and will apply SCT methodologies as proposed by the Ministry of Finance because absolute tariffs tend to lead to higher tobacco prices and have an impact on the better public health target, lower smoking rates, to decrease youth access to cigarettes, limited deaths due to smoking, disease burden, etc., avoiding transfer pricing to reduce tax obligations of tobacco companies and forecast revenues.

Combined taxation has also been applied in many neighboring countries, and their lessons in applying mixed taxes have proven to be beneficial both for economic and medical purposes, such as Turkey, Thailand, Brazil.

However, according to expert calculations, this option will help increase tax revenue and increase tax for the tax year of 2020, but if there is no roadmap for raising taxes in the next years, the real price will still be reducing and purchasing power of cigarettes will increase again due to higher income and inflation.

On the public health, goal is not achieved, the additional 1,000 VND/pack of cigarettes will only reduce the annual smoking rate by 1.6% by 2020, which is very low compared to the target of the Government. The national tobacco control strategy up to 2020 is reduced from 45.3% in 2015 to 39% in 2020.

In order to achieve public health objectives, we recommend the Ministry of Finance to consider and amend this plan as follows: To supplement the absolute rate of 2,000 VND/bag and 1,500 VND/cigar and continue to adjust absolute tax rates in subsequent years to offset inflation and income growth.

In addition to adjusting taxes to raise tobacco prices, access restrictions, in your opinion, what should Vietnam take further measures to reduce the number of tobacco users and prevent harmful effects of this item?

Tax and price policy is proven to be the most important and effective solution to reducing tobacco consumption. Besides, other solutions have a good impact on reducing consumption such as enforcing strictly smoke-free environment in restricted areas, banning all forms of promotion and sponsorship of drug products, print the large side health warnings on packages and increase communication education to raise public awareness of tobacco harm to smokers and those around them. This contributes to reducing the consumption of this deadly product.

Thank you!

By Hong Vân / Huu Tuc