The Ministry of Health has proposed increasing the special consumption tax on tobacco from the current 65 percent to 105 percent in 2015 to discourage smoking.
Under the proposed hike, the tobacco tax would reach 145 percent in 2018 and 155 percent in 2018, the ministry said in a statement.
The increases aim at reducing the number of smokers in Vietnam by eight percent from 2012-2020.
According to the health ministry, the average age of smokers in Vietnam has become younger and the cheap price of tobacco is a contributing factor.
A recent survey by the Health Strategy and Policy Institute found that Vietnamese people spend about VND22 trillion (US$1.04 billion) a year on tobacco.
Widespread smoking is estimated to cost Vietnam up to VND23 trillion annually in treatment and diminished labor capacity.
Phan Thi Hai, spokeswoman of the Vietnam Steering Committee on Smoking and Health (VINACOSH), said up to 21.6 percent of people between 16-24 years old in Vietnam smoke.
“Many Vietnamese youths will suffer harmful consequences from smoking," she said. "Increasing taxes is an effective way to limit the number of smokers and significantly increase state revenues,” she said.
According to VINACOSH, taxes account for 41.6 percent of cigarette retail prices in Vietnam, a very low proportion compared to other countries in the region and the world.
The proportion is 80 percent in France, 73 percent in Germany and 60 percent in Australia.
In its plan on increasing the tobacco tax, the health ministry estimated that the proportion of male smokers in Vietnam will fall from a figure of 47.4 percent (recorded in 2011) to 39 percent in 2020.
Meanwhile, state revenues generated by the tobacco tax are expected to soar to VND9 trillion in 2015 and VND24.1 trillion by 2018.
The World Health Organization and World Bank recommend that Vietnam levy taxes of between 65-70 percent on tobacco to effectively limit smoking.
Nguyen Tuan Lam of WHO Vietnam dismissed concerns that the tax would prompt smuggling.
According to the Vietnam Tobacco Association, fluctuations in smuggled cigarettes are unrelated to tax policies.
“In Vietnam, the prices of most smuggled cigarettes are 30-40 percent higher than the same product manufactured locally,” he said.
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