The government has proposed to increase luxury tax on tobacco to 70 percent in 2016 and 75 percent in 2019, from the current 65 percent, in an effort to reduce smoking rate among men.
The proposed increases, part of a draft amendment to the Law on Special Consumption Tax which will be voted upon by the parliament next month, has been criticized by health experts as modest.
Earlier, the health ministry proposed a tax raise of at least 85 percent in 2015 and 105 percent in 2018, which it said would be a "win-win solution" that would help reduce smokers, increase tax revenues while does not harm tobacco businesses.
Even by increasing tax at such rates, the smoking rate among men would only reduce to 42 percent in 2020 from the current 47.4 percent, shy of the government's target of 39 percent, the ministry said.
The World Health Organization office in Vietnam have suggested lawmakers raise the tax to 105 percent in 2015 and 145 percent in 2018 to achieve that target.
However, the finance ministry have opposed the higher tax raise, claiming that it would only fuel tobacco smuggling, which has already deprived the country an estimated VND6.5 trillion annually in tax revenue. Cigarette imports are banned in Vietnam.
According to Vietnam's Steering Committee on Smoking and Health, Vietnamese smokers spent VND45 trillion (US$2.12 billion) on tobacco and the treatment for related diseases in 2012 -- that's triple the revenue Vietnam took in from tobacco sales that same year.
Adjusted for inflation, the government's proposed luxury tax raise on tobacco would be by roughly 1 percentage point annually between 2016 and 2018, according to Pham Thi Hoang Anh, Country Director of Health Bridge Canada.
Compared with the country's economic growth forecast of at least 5 percent annually during the same period, such a raise is "too low," Anh told the VnExpress news website.
Consequently, domestic demand for tobacco would not decrease and the target of cutting down on smokers would be unattainable, she said.
VnExpress also quoted Luong Ngoc Khue, director of the Health Ministry's Administration of Health Examination and Treatment, as saying that the government could learn from the last tax raise in 2008.
The luxury tax increased by 10 percentage point to 65 percent that year, but that "did not guarantee a reduction of tobacco consumption" in the ensuing years, he said.
Therefore, "the proposed increase of 5 percentage point would be unable to to cut tobacco consumption as expected," Khue said.
Liquor, beer tax raise
The luxury tax amendments, which will be discussed by lawmakers on November 4 and voted upon later the same month, also proposed increasing taxes on alcohols.
Accordingly, tax will increase from 50 percent to 65 percent on products containing 20 percent of alcohol and over, and from 25 percent to 35 percent on those containing less than 20 percent of alcohol.
Tax on beer will increase from current 50 percent to 55 percent in July 2015, to 60 percent in 2017 and 65 percent in 2018.